UK Chancellor’s Economic Update could Trigger GBP/AUD Exchange Rate Turbulence
The Pound has seen a minor decline against the Australian Dollar on 12th March, ahead of potentially greater losses on 13th March.
Chancellor Philip Hammond will deliver the 2018 Spring Statement on the day and economists are divided about its possible contents.
The general consensus is that the statement will be brief, which limits the potential for high-impact observations and announcements from the Chancellor.
If Hammond reveals fresh spending plans for under-pressure public services then the Pound could appreciate, although this isn’t guaranteed.
More widely, if the Office for Budget Responsibility (OBR) makes a positive assessment of the UK economy then the Pound may also advance.
Last year’s Autumn Budget saw the OBR cut its growth forecasts, so if the institution makes a positive revision then Pound traders may be reassured about the future.
UK Inflation Rate Slowdown could Trigger GBP/AUD Exchange Rate Decline
Less positively, the Pound to Australian Dollar (GBP/AUD) exchange rate could fall on 20th March when UK inflation rate figures for February will be announced.
The current estimate is for a year-on-year decline from 3% to 2.9%, which will lessen the chances of a Bank of England (BoE) interest rate hike in the coming months.
Lower interest rates reduce the pressure on the BoE to act, especially when coupled with slow wage growth and higher unemployment.
Australian Dollar to Pound (AUD/GBP) Exchange Rate Losses Forecast on Falling Confidence Scores
The Australian Dollar could fall back against the Pound this week, if Australian confidence readings on 13th March show slowing economic activity.
NAB bank is predicted to report a decline in business confidence during February, while Westpac’s consumer confidence score for March is also tipped to decline.
Neither reading is expected to show a large reduction in confidence, but given wider global economic tensions a decline could still weaken the AUD.
Update on Australian-US Steel Tariffs could Boost Australian Dollar to Pound Exchange Rate
Less concretely, a clarification about steel tariffs in the near-future could boost the Australian Dollar or drag it down.
US President Donald Trump announced that the country would be imposing tariffs on steel imports in the future, in a bid to reduce over-reliance on foreign materials.
This declaration had a polarising reception – outside of the US, the general opinion was that this could damage the global economy and trigger trade wars.
Australia has seemingly gained some kind of exemption from the tariffs, but this hasn’t been completely confirmed yet.
Posting on social media on 9th March, President Trump said;
‘[We are] working very quickly on a security agreement so we don’t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!’.
While Australian Prime Minister Malcolm Turnbull has pre-emptively stated ‘[tariffs] won’t have to be imposed on Australia’, this arrangement has not been set in stone yet.
If an Australian exemption from the tariffs is officially confirmed then the Australian Dollar could rally against the Pound.
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