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Pound Australian Dollar (GBP/AUD) Exchange Rate Stumbles on Upbeat Chinese Ecostats

April 13, 2018 - Written by John Cameron

April Seasonal Support Returns, GBP/AUD Exchange Rate Fails to Capitalise

The Pound Australian Dollar (GBP/AUD) exchange rate tumbled on Friday, failing to ride the wave of April seasonal support and falling as the ‘Aussie’ Dollar capitalised on a run of rather upbeat Chinese data releases.

Sterling historically sees support in April, regardless of the macroeconomic/political backdrop, with the Bank of America Merill Lynch describing it as the strongest seasonal trend amongst the majors.

Indeed, Neil Jones, Head of Hedge Fund Sales at Mizuho Bank Ltd echoed this sentiment, stating:

‘Historically it’s pretty reliable. So I would go with it again this year. It’s self-fulfilling’.

There are, however, other reasons for recent rise in demand for the Pound, particularly the growing anticipation for a rate increase from the Bank of England (BoE) in May and progress made in Brexit negotiations in Q1 2018.

Chinese Imports Surge, Australian Dollar (AUD) Exchange Rates Climb

The Australian Dollar benefited from a double-whammy of positive news today; climbing thanks to returning risk appetite amongst investors and a run of upbeat Chinese ecostats.

China’s trade balance figures took precedence, with a substantial 11.7% rise in imports boding extremely well for Australian commodities and thus the Australian economy as a whole.

This increase in Chinese imports also helped to cool US/China trade tensions and the atmosphere in the markets.

In other news, US President Donald Trump has stated that he could be willing to re-join the Trans-Pacific Partnership (TPP) (which includes Australia), as long as the new deal is favourable.

This is great news for the Australian economy - with markets confident that the partnership could provide a substantial lift.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Inflation in the Spotlight

Sterling could find room to rally next week as markets react to the UK’s highly anticipated inflation, and labour market figures.

This will include readings for wage growth, unemployment and consumer price inflation, all of which have the potential to knock GBP/AUD up or down.

If the labour market continues to remain in robust form then it would bode extremely well for the state of the UK economy and likely give the BoE even more reason to move hawkishly in May.

Conversely, a substantial drop in consumer prices could ward the central bank away from more aggressive monetary policy measures.
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