The Pound has bounced back against the Australian Dollar on the afternoon of 13th March, having risen by 0.4% in the pairing.
This GBP/AUD exchange rate rise has been triggered by trader reactions to the spring statement, which have been broadly positive.
Although there were a number of economists casting doubt on the UK’s future performance, the general message of future growth has been welcomed.
(First published 13th March, 2018)
Signs of Pressure on UK Consumers could Drag GBP/AUD Exchange Rate Down
On 13th March, the Pound to Australian Dollar exchange rate has seen a minor decline before the spring statement is presented.
Beyond this mini-economic update, however, the Pound could also be affected over 20th and 21st March by UK inflation and earnings data.
The inflation rate figures for February will be out first and are tipped to show a slowdown in all fields.
Average earnings stats out a day later are projected to show no major change in levels of wage growth.
Although falling inflation and unchanged earnings will be good news for UK consumers, such results are not guaranteed.
If inflation remains high and earnings fall, the Pound could drop sharply against the Australian Dollar.
Higher inflation and lower earnings will increase pressure on UK consumers and may lower the chances of a Bank of England (BoE) interest rate decision.
GBP/AUD Exchange Rate Turbulence Possible on UK Spring Statement
Returning to the spring statement, this imminent economic assessment could have significantly impact the Pound to Australian exchange rate in the near-term.
Chancellor Philip Hammond will be giving an update on UK economic performance and some economists are predicting a positive message.
Among the optimists has been University of York Economics Professor Gulcin Ozkan, who has said;
‘What I’m expecting and hoping is [Mr Hammond] will identify key areas that are challenges in terms of the long term fiscal issues.
I think he will present his statement as good news and it is good news to some extent.
I’m not expecting a huge giveaway in any way as he has been very, very cautious in pointing to the importance of the debt levels’.
If Pound traders take any cautious optimism to heart, the Pound to Australian Dollar exchange rate could advance today.
Australian Dollar to Pound Exchange Rate Faces Volatility on Upcoming RBA Bulletin
The Australian Dollar to Pound exchange rate could next be influenced by the Reserve Bank of Australia (RBA) bulletin release on 15th March.
The bulletin provides a summary of economic activity over previous months, in addition to revealing the RBA’s outlook on future monetary policy.
If the predictions are gloomy then the Australian Dollar could decline against the Pound, given the negative implications of cautious forward guidance from the central bank.
Long-time issues for RBA policymakers have included slow wage growth and limited levels of household saving.
If the bank predicts continued problems with these areas then the Australian Dollar could be devalued, as this would lower the chances of a near-term interest rate hike.
Price Reveal for Australian Tariff Exemption could Trigger AUD/GBP Exchange Rate Drop
Another factor which could affect the Australian Dollar to Pound exchange rate in the future is the detail on Australia’s exemption from US steel tariffs.
Australia has seemingly been spared from the controversial metal tariffs, but questions remain about the price for this exemption.
Australian PM Malcolm Turnbull has denied that the deal will mean a change to Australian-US security arrangements, but a recent tweet from Donald Trump suggests otherwise.
If more details emerge and there is a high price to pay for this tariff exemption, the Australian Dollar could drop against the Pound.