Pound to Australian Dollar Exchange Rate Forecast: Reserve Bank of Australia News Could Help GBP/AUD Recovery Next Week

Update 2: Pound to Australian Dollar Exchange Rate Edges Higher on Friday Despite Broad Pound Weakness

The Pound to Australian Dollar (GBP/EUR) exchange rate edged higher on Friday despite market disappointment in UK Prime Minister Theresa May’s Brexit speech.

Investors were hoping for more clarity on what kind of Brexit the UK government would aim for.

Demand for the Australian Dollar remained weaker however, amid concerns about the US Presidency cracking down on trade by announcing steep tariffs on imports of steel and aluminium.

GBP/AUD traders are now highly anticipating next week’s Reserve Bank of Australia (RBA) policy decision for any reaction the bank has on the tariff news.

Update 1: Pound to Australian Dollar Exchange Rate Sees Modest Advance on Possibility of Trade War

Demand for the Australian Dollar (AUD) weakened further on Friday morning as investors reacted to the latest comments from the US President, which helped the Pound to Australian Dollar (GBP/AUD) exchange rate to edge higher.

The US President indicated via Twitter that a potential trade war would be easy to win.

His recently ramped up protectionist rhetoric has left investors hesitant to buy risky trade-correlated currencies like the Australian Dollar.

However, GBP/AUD could still end the week lower if UK Prime Minister Theresa May’s afternoon Brexit speech fails to impress Sterling investors.

Pound to Australian Dollar Exchange Rate Slips despite Trade Tariff News Weakening AUD

Despite news that the US President had slapped strict trade tariffs on steel and aluminium, the Pound to Australian Dollar exchange rate has continued to trend lower today.

Brexit concerns weighed heavily on the Pound , preventing it from benefitting from Australian Dollar weakness.

GBP/AUD losses have been limited though, as the pair opened the week at the interbank level of 1.78 and towards the end of the week was only trending around half a cent lower.

Concerns over newly-announced trade tariffs from the US government weighed on the Australian Dollar on Friday. The US President announced a crackdown on imported steel and aluminium, with tariffs being planned for as much as 25% on imported steel.

While details on potential exemptions to the tariffs have not yet been discussed, markets are concerned that the news could have a negative impact on Australia’s mining industry and iron ore exports.

As more details come out of the tariff plans, investors are eager to hear about the Reserve Bank of Australia’s (RBA) view on how these may impact the country’s economic outlook.

Australian Dollar investors are now anticipating next Tuesday’s RBA policy decision even more greatly.

GBP/AUD Pressured Today by Persistent Brexit Uncertainties

Despite risk-off movement and general Australian Dollar weakness, the Pound has edged lower throughout the week – largely due to market concerns that a ‘hard Brexit’ may still be possible.

Amid a fresh disagreement between the UK and EU on how to handle the border between Northern Ireland and Ireland after Brexit, EU chief negotiator Michel Barnier has reminded the UK that a post-Brexit transition period is still not a done deal.

The latest perceived splits between the UK and EU worsened Brexit negotiation uncertainty, with many traders once again anxious that talks could fall through and lead to a ‘hard Brexit’ – in which Britain could lose all its market connections to the EU.

This morning, Sterling trade is limp as investors nervously await a speech from UK Prime Minister Theresa May.

The hope is that May will offer some kind of clarity or relief about the UK government’s Brexit outlook.

Pound to Australian Dollar (GBP/AUD) Forecast: Services and RBA News Next Week

Next week’s trade session is likely to be more influential for the Pound to Australian Dollar (GBP/AUD) exchange rate, at least in terms of data.

However, depending on how Brexit news unfolds over the weekend, Pound traders may continue to focus on Brexit news rather than be influenced by UK ecostats.

If the UK government fails to sufficiently clarify its Brexit stance or fissures remain between the UK and EU on key issues like the Irish border, Sterling is likely to remain pressured and volatile next week – even if key UK data impresses.

Monday will see the publication of Britain’s services PMI for February from Markit. As services make up a notable chunk of Britain’s economic activity, this report is influential.

As for Australian data, Australian services stats will also be published on Monday, as well as January building permits figures.

Overall though, developments on US trade tariff news and Tuesday’s Reserve Bank of Australia (RBA) policy decision are more likely to be influential to AUD next week.

If the US indicates that Australia may be exempt in some way from its trade tariffs, the ‘Aussie’ could strengthen in a relief rally. If not though, investors will be looking for insight from the RBA on the issue next week.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard