Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs as UK Trade Deficit Shrinks

April 11, 2018 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs as UK Trade Deficit Shrinks

UK Trade Balance Readings Beat Expectations – Pound (GBP) Exchange Rates Capitalise

The Pound Australian Dollar (GBP/AUD) exchange rate climbed on Wednesday, supported by news that the UK’s trade deficit narrowed in February.

According to the Office for National Statistics (ONS), the UK’s trade deficit shrank from £-2.949B to £-0.965B in February, confounding expectations that it would widen to £-3.4B.

This news, whilst positive, was accompanied by a rather disappointing performance in the UK’s industrial and manufacturing production readings, as well as a poor NIESR GDP estimate for the first quarter of 2018.

Nonetheless, it would appear that the upbeat deficit reading was enough to keep Sterling afloat against the Australian Dollar, particularly with the US inflation readings due for imminent release.

Australian Ecostats Continue to Disappoint – AUD Exchange Rates Come under Pressure

Data from Australia has been rather poor as of late, with the NAB business confidence reading hitting 7, vs an expected 12 and the Westpac consumer confidence reading printing at 102.4, down from the previous score of 103.

It should be stressed, however, that many analysts, including NAB’s Chief Economist, Alan Oster, remain optimistic about the Australian economy, with Mr Oster even seeing a possible rate hike towards the end of the year.

Speaking to the press, he stated:

‘The strength in business conditions and leading indicators are consistent with stronger economic growth in coming quarters’.

On this note, Reserve Bank of Australia Governor Philip Lowe is due to give a speech later today which could make or break demand for the Australian Dollar, depending on whether his sentiment is overly cautious, or optimistic.

US Inflation Imminent – What can we Expect for the GBP/AUD Exchange Rate?

The US consumer price inflation readings and the Federal Open Market Committee (FOMC) meeting minutes are both due imminently, with the market consensus being a marked acceleration.

If this does indeed occur then the US Federal Reserve could be pushed into hawkish overdrive, making 4 rate hikes this year even more likely in the eyes of the markets.

Furthermore, the March meeting minutes will be studied for similar reasons, with a hawkish outlook also liable to massively siphon demand away from the Australian Dollar.

Beyond data, analysts will also be keeping a keen eye on the situation in Syria, with any indication of escalation from Russia or the US liable to cause big tremors amongst the markets.

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TAGS: Pound Australian Dollar Forecasts