The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate declined on ‘Aussie’ strength and the risky commodity currency could continue to rise following a record 18.5% hike in prices for iron ore.
Australian Dollar (AUD) Reaches Highs Across the Board after a Bullish 18.5% Rise in Iron Ore Prices
While the Pound (GBP) briefly advanced on today’s opening levels, this seems unlikely to continue as positive Australian data continues to pile on. The GBP/AUD pairing is currently down -0.2% having achieved a high of 1.9238.
Following the Pound’s steady drop against the ‘Aussie’ throughout the first week of March, the GBP half of the pairing has been unable to maintain any sort of growth. This is likely due to higher-than-expected Australian Gross Domestic Product releases last week.
Vital Monday and Tuesday news reported that, following recent commodity demand, iron ore prices soared by 18.5% in a single day – the biggest one-day gain since daily records began in 2008.
This puts iron ore price growth at well over 50% this year, allowing Australian economy to enjoy continued growth through export of their increasingly strong commodity.
Brexit Concerns and Federal Reserve Interest Rate Restraint allow the AUD/GBP Exchange Rate to Climb
The increased appeal of high-risk currencies, like the AUD, was also affected by lower-than-expected US data diminishing the appeal of the safe-haven US Dollar (USD). The Federal Reserve seems set to adopt a slightly more dovish outlook on interest rate hikes, causing investors to look to the riskier and higher-yielding Australian Dollar.
Optimistic Chinese economic growth targets of 6.5-7% also factor towards the AUD’s strength as China is one of Australia’s vital trading partners.
A lack of vital upcoming UK data and calm after last week’s UK releases seem to have allowed the Pound to float entirely on the whims of political news and strengths of foreign currencies. Growing anxiety towards EU Referendum talks and decisions ahead of the June vote are causing more bearish tendencies and outlooks in Sterling investors.
Record Breaking Iron Ore Price-Jump May Spur Continued Growth from Australian Dollar (AUD)
Logically, such a groundbreaking increase in commodity pricing implies a groundbreaking increase in commodity demand – a circumstance liable to support the Australian Dollar’s continued outperformance.
Some economists claim that considerable ‘Aussie’ momentum and favour could continue to push it forward. However as the GBP/AUD pair nears a one-year low, the riskier AUD could potentially bounce back as the exchange rate balances itself out after a long period of bearish movement from the Pound.
It is also possible for ‘Aussie’ investors to react negatively to an upcoming speech from Reserve Bank of Australia Deputy Governor Phillip Lowe. However this is unlikely following positive NAB business data from earlier today, with business confidence remaining stable and business conditions improving.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9053 while the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate trends in the region of 0.5243.