?Aussie? Dollar Capitalises on USD Weakness ? GBP/AUD Exchange Rate Trades Lower

March 23, 2018 - Written by David Woodsmith

STORY LINK ?Aussie? Dollar Capitalises on USD Weakness ? GBP/AUD Exchange Rate Trades Lower

EU Leaders Approve Brexit Transition Terms – GBP/AUD Exchange Rate Fails to Capitalise

The Pound Australian Dollar (GBP/AUD) exchange rate traded lower on Friday, failing to fully capitalise on news that EU member states have officially approved the terms of Britain’s Brexit transition period – a big step forward in negotiations.

The text, which discussed trade, security and other issues was agreed in less than half a minute, paving the way for the next phase of Brexit talks to begin.

The UK is now set to engage in a transition period that will cease on the 31st of December 2020, during which the UK will be able to negotiate trade deals with other nations.

UK Prime Minister Theresa May has stated that she believes there is a ‘new spirit of cooperation and opportunity ahead’, with both the EU and the UK sounding relatively optimistic about the process ahead.

Whilst positive, it would seem that this news was insufficient in bolstering the Pound against the Australian Dollar, with some profit-taking in the early hours and the current AUD rally leaving GBP/AUD paring some of its recent gains.

US Reveals Chinese Import Tariffs – AUD Surprises Markets by Rallying

The Australian Dollar surprised economists by rallying today, resilient in the face of the recent US Fed rate hike and news that the US intends on applying import tariffs on up to $60bn of Chinese goods.

The White House has argued that these tariffs are necessary in order to better protect American industries, with China’s sizable trade surplus, questionable intellectual property usage and import tariffs of their own warranting a harsh response.

Beijing has been quick in responding, asking the US to ‘step back from the brink’ and negotiate a settlement.

If this does not occur, however, then China has threatened tariffs of their own targeting the US agricultural sector, with goods such as beans, pork and wine, amongst others, in the crosshairs.

Beyond this, the US President has tweeted that he is considering vetoing the $1.3tn US spending bill, potentially risking another governmental shutdown.

Combined, this news has spooked investors, driving people away from the ‘Greenback’ to the currently better-performing Australian Dollar.

How long this will continue, however, remains to be seen, particularly with the Reserve Bank of Australia (RBA) currently categorised as dovish compared to both the Bank of England and the US Fed.

Bank of England Rate Hike Prospects – GBP/AUD Exchange Rate Forecast

In other news, Bank of England (BoE) Policymaker Gertjan Vlieghe had some rather hawkish things to say today at a speech in Birmingham, asserting that he sees the need for one or two more rate hikes per year over the next few years.

This outlook supported the perspective of Policymakers Ian McCafferty and Michael Saunders, both of whom broke ranks and voted for an immediate rate increase at the latest BoE rate decision.

Moreover, the minutes from the latest meeting and Vlieghe’s comments have effectively laid the groundwork for a rate hike in May, a possibility that could kick GBP/AUD higher as the meeting approaches.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Australian Dollar Forecasts