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GBP to AUD Exchange Rate Advances as Risk-Sentiment Fades

February 13, 2017 - Written by Ben Hughes

The Pound to Australian Dollar exchange rate’s losses were minimised on Tuesday afternoon, as markets suddenly took a risk-off turn and sold the ‘Aussie’ due to an increase in demand for the US Dollar.

Perceived hawkishness from Federal Reserve Chairwoman Janet Yellen left risky currencies like the ‘Aussie’ weaker on Tuesday afternoon, allowing the weak Pound to claw back some of its losses.

[Previously updated 11:00 am]

As Chinese consumer prices were found to have accelerated further than forecast in January a resurgence in risk appetite helped to buoy the Australian Dollar on Tuesday.

This prompted the GBP AUD exchange rate to slump sharply, especially in the wake of a disappointing UK consumer price index report.

[Previously updated 13/02/2017]

The Pound to Australian Dollar exchange rate advanced when markets opened on Monday despite strong domestic factors in Australia, as disappointing Japanese data caused investors to worry about the Asian trade outlook.

GBP AUD trended flatly last week, ending the week at 1.6260 – just above its opening levels. As a result, the pair fell from its weekly high of 1.6475. GBP AUD began to advance again on Monday.

GBP Sturdy Following Friday’s Strong UK Data

The Pound avoided further losses against the Australian Dollar last week thanks to solid UK data published on Friday.

Britain’s December trade balance improved to -£3.30b and private sector data also beat expectations. Manufacturing production rose from 1.7% to 4% year-on-year, well above the projected 1.8%.

Meanwhile, industrial production improved from a revised figure of 2.2%, to 4.3%. It was projected to only reach 3.2%.

Due to the strength of these figures, some analysts believe Britain’s Q4 Gross Domestic Product (GDP) result will be even better than expected.

Australian Dollar (AUD) Weakened as Japanese Growth Disappoints

Demand for risk-correlated currencies like the Australian Dollar weakened when markets opened this week as traders reacted to news from Monday’s Asian session.

Japan’s annualised Q4 Gross Domestic Product (GDP) results came in worse than projected – falling from 1.4% to 1% despite being projected to come in at 1.1%. This caused traders to worry about the Australasian trade outlook.

As a result, the Australian Dollar was unable to benefit from strong iron ore prices. Despite its recent highs, demand and prices for Australia’s most lucrative commodity continued to outperform expectations.

Last week’s strong demand for the ‘Aussie’ was due to a hawkish tone from the Reserve Bank of Australia (RBA) but this week’s drop in risk-sentiment saw it fall from its highs.

GBP/AUD Forecast: Australian Confidence and Employment Reports Ahead

The Pound to Australian Dollar exchange rate is likely to become a little more data-focused in the coming days.

Tuesday will be a key day for data, as Britain’s January Consumer Price Index (CPI) results will be published. Australian data includes the NAB’s January business confidence print that will be published during the Asian session.

Wednesday’s session will follow with Westpac’s consumer confidence survey for Australia, as well as UK jobless claims and unemployment figures.

Then, later in the week, Australia’s key employment report will come in which could offset Reserve Bank of Australia (RBA) optimism if it disappoints.

Also vital to GBP/AUD trade is the possibility that US President Trump may introduce his highly anticipated new tax plans this week. If he does, demand for risky currencies like the ‘Aussie’ could plunge.

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