Australian Dollar Pound Exchange Rate Bolstered by Surge in Iron Ore, Cooling Market
Risk-correlated currencies like the Australian Dollar have seen a wide variety of shifts in the last few days, most significant being the reaction to Donald Trump’s win of the US Presidency. However, iron ore prices surged in Thursday’s Asian session and as the commodity hit its best level since January 2015 AUD GBP recovered and trended above the level of 0.62 once more.
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Australian Dollar (AUD) Benefits from Surge in Iron Ore Prices
The risky Australian Dollar was one of the worst performing currencies early after the announcement of Trump’s win of the US 2016 Presidential election and the currency remained weak throughout the day.
With investors wary on Trump’s potential protectionist policies on trade and foreign relations, currencies correlated with trade-heavy nations suffered from uncertainty. As a result, ‘Aussie’ investors looked to safer investments.
However, markets cooled quicker-than-expected from Trump shock as Wednesday drew on and by Thursday risky currencies were already less volatile.
The Australian Dollar benefitted significantly on Thursday from news that iron ore had hit US$70.98 a barrel, its highest level since January 2015. As Australia’s most lucrative commodity, strong iron ore prices often correlate to AUD strength.
Pound (GBP) Sturdy on US Trade Hopes
Sterling initially reacted limply to Wednesday’s US election news, but throughout the day the British currency strengthened due to a lack of downside factors.
The currency has recently floundered on key support levels after weeks of Brexit-related selloffs. With Brexit developments slowing ahead of December’s Supreme Court decision on whether or not MPs should have a vote on Article 50, there is less uncertainty in short-term Pound trade which allowed it to strengthen this week.
GBP investors have also been encouraged by indications from US President-to-be Donald Trump that Britain would be first in line for a US trade deal once the Brexit process finishes.
Australian Dollar Pound Exchange Rate Forecast: Movement to Calm on Friday
Since the election result, the Australian Dollar Pound exchange rate has fluctuated in a wide range while staying within a penny of the week’s opening levels.
While AUD GBP is currently above the week’s opening levels and performed strongly in Thursday trade, its movement is likely to be flatter on Friday as markets continue to cool from the week’s Trump shock.
However, this calming movement could be interrupted if Trump indicates that he intends to push ahead with some of his more controversial protectionist policies for trade.
Meanwhile, Sterling continues to trend sturdily after reaching new support levels in the last week. As a result, AUD GBP gains are forecast to be limited in the next week until risk sentiment returns to normalcy.
At the time of writing, the Australian Dollar Pound exchange rate trended in the region of 0.61, while the Pound Australian Dollar exchange rate traded at around 1.61.