Pound Australian Dollar Forecast: GBP/AUD and GBP/NZD Exchange Rates Volatile amid Increased Global Trade Tensions

GBP/AUD, GBP/NZD Exchange Rates Fluctuate as US-China Trade Uncertainty Weighs on Markets

The Pound Sterling to Australian Dollar (GBP/AUD) and Pound to New Zealand Dollar (GBP/NZD) exchange rates both fluctuated this week in the wake of increased global trade uncertainty.

At the time of writing both GBP/AUD and GBP/NZD are trading slightly below this week’s opening levels and look on track to close the session lower.

Pound Sterling Weakened by Slowing Growth

The Pound struggled to make any headway against either the Australian Dollar or New Zealand Dollar this week as some technical based selling and weak GDP figures weighed on the currency.

GBP was met by a dramatic sell off on Tuesday morning as a lull in impactful data saw markets carry out some end-of-month repositioning.

Sterling sentiment quickly rebounded however on rising Brexit optimism, which saw GBP/AUD and GBP/NZD recoup the majority of its losses.

This was driven by Labour’s plans to amend the UK’s withdrawal bill to grant MP’s greater say over negotiations as well as reports that the government will soon publish new plans on how it aims to avoid a hard border with Ireland.

However the Pound struggled to hold onto its gains on Thursday as UK fourth quarter growth was confirmed to have slumped to a five-year low of 1.4% in 2017.

Australian Dollar (AUD), New Zealand Dollar (NZD) Rocked by Global Trade Fears

Both the Australian Dollar and New Zealand Dollar found themselves fluctuating against the Pound this week as trade uncertainty between the US and China led to a sharp fall in market risk appetite.

At the start of the week however the markets remained relatively calm due to optimism from US Treasury Secretary Steven Mnuchin about the possibility of the US reaching a trade agreement with China.

When combined with broad based weakness in the Pound, this allowed AUD/GBP and NZD/GBP to both soar on Tuesday.

However considerable pressure was then placed on both currencies again on Wednesday following reports that Trump’s administration was considering invoking emergency powers in order to curtail Chinese investment in technologies that the US had deemed sensitive.

This saw Beijing warn on Thursday that the US risked further escalating the trade spat.

A Chinese spokesman said:

‘The malicious practices of the United States are like opening Pandora’s Box, and there is a danger of triggering a chain reaction that will spread the virus of trade protectionism across the globe.’

GBP/AUD Exchange Rate Forecast: Will Sterling Slide on Slowing Private Sector Growth?

Looking ahead to next week’s session the GBP/AUD exchange rate is likely to stumble as economists expect the UK’s latest PMI figures to paint a gloomy picture of UK private sector activity in March.

GBP investors are likely to focus their attention on the Manufacturing and Services PMIs in particular, with slowing growth in both sectors likely to weigh heavily on the Pound.

Meanwhile in terms of the Australian Dollar all eyes will be on the Reserve Bank of Australia’s (RBA) latest policy meeting in the coming week, with the ‘Aussie’ likely to tumble if the bank continues to remain cautious in its outlook for 2018.

The New Zealand Dollar may also fall in next week’s session following the latest Global Dairy Auction, with another dip in dairy prices likely to prompt some weakness in the ‘Kiwi’.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail