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NIESR Estimates a Slowdown in UK Growth - Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates

March 9, 2018 - Written by Toni Johnson

Pound Australian Dollar (GBP/AUD) Exchange Rate Proves Trades Volatile as UK Ecostats Disappoint

The Pound Australian Dollar (GBP/AUD) exchange rate fluctuated on Friday, rising in the early hours as US President Donald Trump signed his tariffs on steel and aluminium into reality (albeit in 15 days), but falling later as markets reacted to a notable drop in the UK’s National Institute of Economic and Social Research (NIESR) monthly GDP estimate.

According to the NIESR, UK GDP grew by 0.3% in the three months to January, down from the previous month’s reading of 0.4%.

The group also indicated that growth could have been slowed down even further in March, with the recent extreme weather conditions brining much of the UK to a halt.

Amit Kara, head of UK Macroeconomic Forecasting at NIESR stated:

‘Activity has eased slightly and is likely to slow further in March when the full impact of the recent extreme weather conditions will be realised. Economic growth continues to be driven by both the manufacturing and the service sectors, supported by a buoyant global economy while construction output lags’.

Beyond this, the UK’s construction sector posted a very disappointing start to the year, with the latest figures from the Office for National Statistics (ONS) revealing a -3.4% fall in output in January, below the -0.3% fall that was expected.

Analysts have blamed this on a large drop in private house-building, though others have pointed to post-Brexit uncertainty as another cause.

Michael Thirkettle, Chief Executive at McBains noted:

‘These latest figures are evidence that 2018 began much the same as 2017 ended, a continuation of sluggish output not helped by factors such as ongoing uncertainty over the Brexit deal’.

Combined, this news kept Sterling on fragile footing.

Australian Dollar (AUD) Exchange Rates Volatile as Trump Signs Tariff Proclamation

The ‘Aussie’ Dollar proved volatile this Friday, falling as US President Trump signed the tariff proclamation but gaining some ground on news that US wage growth decelerated in February.

According to the US Bureau of Labour Statistics, average hourly earnings cooled in February to 2.6% year-on-year, down from the previous period’s growth of 2.8%.

This news diminished the chances of a hawkish move from the US Federal Reserve this month and quickly encumbered the ‘Greenback’.

In other news, President Trump has agreed to meet with North Korean leader Kim Jong Un, with the Sovereign state also announcing their apparent willingness to cease their missile test program and disarm.

This meeting is unprecedented, with no sitting American President ever having met a North Korean leader, and it could potentially spell the beginning of stabilising relations.


It should be stressed that North Korea has attempted to use its missile test program as leverage in the past, claiming that they will cease testing in exchange for supplies and support.

In this respect, many are massively sceptical that the regime will disarm.

Nonetheless, progress on this front has enlivened the markets with a fresh infusion of risk appetite, sending commodity currencies like the ‘Aussie’ Dollar and the New Zealand Dollar (NZD) higher.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Could a BoE Rate Hike Still be on the Cards?

Next week is a rather sparse one for UK data, but the markets will still find plenty to chew on in the form of Brexit related news and the spring budget of 2018.

Markets are currently hoping for sufficient progress to be made on the subject of the UK’s proposed Brexit transition period, something that the Bank of England (BoE) has repeatedly cited as a major factor in deciding future monetary policy measures.

Beyond this, the overall outlook for a rate hike in May this year has only grown, with 5 of the nine policymakers regarded as outright hawkish, 2 centrist, and the remaining 2 labelled as dovish.

In this respect, any progress on the Brexit front could send GBP/AUD higher, whilst ongoing signs of impasse on elements like the Northern Irish border could drag this pairing down.
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