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Pound to Australian Dollar Forecast: Is GBP/AUD Volatility ahead on UK Trade Stats?

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The Pound to Australian Dollar (GBP/AUD) exchange rate has risen even higher on Monday afternoon, up by 0.5% to 1.7312.

Although there haven’t been many fireworks from the ongoing Conservative cabinet reshuffle, Pound traders seem to be more confident regardless.

This may because the dreaded ‘Minister for No Deal’ position has yet to materialise, suggesting that (for now), the government isn’t favouring a ‘no deal’ Brexit.

(First published 8th January, 2018)

Decline in UK Trade Balance could Cause GBP/AUD Exchange Rate Decline

The Pound to Australian Dollar exchange rate (GBP/AUD) has opened weekly trading in a stable position, with GBP having risen by 0.3% in the pairing.

Despite this, however, Sterling remains vulnerable to potential losses on this week’s high-impact UK data.

This will come on Wednesday, consisting of the high-impact trade balance reading for November.

Experts believe that the trade reading will show an expansion of October’s £-1.405bn deficit, to the region of £-2.2bn.

Such negative news could result in the Pound declining against the Australian Dollar, particularly if nervous traders attribute such a development to Brexit.

Pound to Australian Dollar Losses Possible on Cabinet Reshuffle

Prime Minister Theresa May could trigger Pound volatility before the UK trade balance stats come out, as she is expected to announce a cabinet reshuffle today.

May has delayed this action since narrowly winning the 2017 general election, likely out of a desire to keep the fragmented government as stable as possible.

Among the positions to fill this time are one vacated by Damien Green, when he was fired as First Secretary of State.

In addition, there are suspicions that the PM could create a ‘Minister for No Deal’ position, designed to plan out contingencies for leaving the EU without a binding deal.

Such an appointment could cause a panic among Pound traders, as it would suggest that the government still believes that ‘no deal is better than a bad deal’.

Australian Dollar to Pound Exchange Rate Rise possible on UK NAB Confidence Stats

While UK economic data is forecast to print poorly on 10th January, Australia’s data contribution could be more supportive for the Australian Dollar.

National Australia Bank (NAB) will release its business confidence reading for December on Wednesday and the current expectation is that the score will rise from 6 points to 10.

Closing 2017 with growing business confidence would be good news for the Australian economy, and could lead to clear AUD/GBP exchange rate gains.

Lower Iron Ore Prices could Reduce Australian Dollar Demand

While the AU confidence reading may support the Australian economy, in the longer term the Australian Dollar might decline because of unsupportive commodity prices.

Commodities traders have primarily been focusing on iron ore, a mining product that has long been exported to China for use in the construction of steel.

Unfortunately for these traders, as well as the Australian economy, there are forecasts for a -20% drop in iron ore prices in 2018 due to reduced Chinese demand.

David Thurtell of the Department of Industry, Innovation and Science has outlined his estimates, stating;

‘The iron ore price is expected to experience ongoing volatility in early 2018, as the market responds to uncertainty regarding the impact of winter production restrictions on demand’.

If prices do drop off in the coming months, the Australian Dollar could weaken because of expectations for worsening exporting revenues.

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