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Pound to Australian Dollar Exchange Rate Outlook Complicated by US-China Relations and RBA Bets

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Pound to Australian Dollar Exchange Rate Slips Ahead of US President’s Trade Speech

Surprising developments in the UK election boosted the Pound (GBP) yesterday but the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate slipped overnight. Sterling fell back slightly, and the trade-correlated ‘Aussie’ (AUD) was supported by trade speculation.

GBP/AUD has been able to sustain most of yesterday’s strong rebound however.

GBP/AUD opened last week at the level of 1.8709, before tumbling to close the week at 1.8626. Yesterday however, GBP/AUD saw a jump in demand on UK election news and touched on a fresh November high of 1.8805.

After an overnight slip of over half a cent, GBP/AUD currently trends near the level of 1.8745. The pair is currently seeing mixed movement in anticipation of upcoming news. Britain’s latest data hasn’t helped the Pound much either.

Pound (GBP) Exchange Rate Rally Already Out of Steam as UK Job Stats Disappoint

Yesterday, investors piled into the Pound amid a surprising development in Britain’s 2019 General Election campaign.

The Brexit Party, a populist party formed earlier this year by Nigel Farage, said that it will not run candidates in seats held by the ruling Conservative Party.

It was perceived as a significant boost to the Conservative Party’s chances of winning a majority at next month’s election. This would help the party to push its relatively soft Brexit plans through UK Parliament.

However, some analysts said that the boost for the Conservative Party may actually be limited. The Pound’s strength slipped overnight as a result.

This morning’s UK job market stats haven’t helped the Pound to keep rallying either. The data fell short in many key prints and kept pressure on the British currency.

In particular investors are anxious about news of the biggest fall in job vacancies since 2009. This was seen as a fresh sign that Britain’s job market was slowing.

Australian Dollar (AUD) Exchange Rates Supported by Data and Rival Weakness

The Australian Dollar has benefitted from Pound weakness, due to some modest support for the antipodean currency.

Investors have found the trade-correlated Australian Dollar more appealing amid hopes that the US and China are getting closer to reaching a deal on trade. The Australian Dollar is holding its ground ahead of an expected trade speech from US President Donald Trump this evening.

On top of that, today’s Asian session saw the publication of NAB’s October business confidence results, which beat expectations of 0 by rising to 2.

This overall subdued figure did little to soften Reserve Bank of Australia (RBA) easing speculation, however.

Due to concerns about global trade and weakness in Australia’s economy, economists are speculating that the RBA will not only cut rates lower next year, but also introduce quantitative easing (QE) measures.

According to a note from Capital Economics:

‘We think that the Bank’s forecasts for GDP growth and the labour market remain too optimistic and we expect the Bank to cut rates to 0.25% and launch quantitative easing in 2020,’

Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Anticipating Trade and Australian Job Stats

While much of this week’s Pound to Australian Dollar (GBP/AUD) exchange rate movement so far has been driven by UK election developments, the Pound’s movement may be limited unless there are further election surprises.

As a result, the GBP/AUD outlook is more likely to be shifted by upcoming news and data with the potential to influence the Australian Dollar.

This evening, US President Donald Trump will hold a speech regarding trade. If he shows signs of softening stances on the US-China trade war, or optimism that a deal is in sight, then the trade-correlated Australian Dollar could strengthen.

Worsening US-China relations would have the opposite effect.

There are also major Australian job stats due in the coming days, which could influence Reserve Bank of Australia (RBA) policy speculation if they surprise.

Australian wage data tomorrow, and job market results due Thursday, could knock the Pound to Australian Dollar (GBP/AUD) exchange rate lower again if they impress investors.