GBP AUD Forecast: Pound to Australian Dollar Exchange Rate Rises 0.3% after AU Trade War Warning

RBA Governor’s Caution over AU Economic Damage Enables GBP/AUD Exchange Rate Advance

The Pound to Australian Dollar exchange rate has made a clear advance on the afternoon of 11th April, rising by a steady 0.3%.

Sterling has appreciated in the pairing due to a continued drain of confidence among Australian Dollar traders.

Reserve Bank of Australia (RBA) Governor Philip Lowe has warned that a US-China trade war could catch Australia in the crossfire, reducing economic growth.

Although Mr Lowe stated that Australian interest rates would likely rise instead of fall at the next adjustment, AUD traders were more concerned about his trade war forecast.

Poor Australian Economic Data Keeps Pound Sterling Demand Higher than Australian Dollar

Despite the handicap of a number of negative UK data releases, the Pound to Australian Dollar exchange rate rose by 0.2% today.

This appreciation is primarily due to low confidence among Australian Dollar traders, given the mixed set of UK ecostats on display.

The latest UK economic data has been disappointing for the most part, revealing slowing month-on-month construction, manufacturing and industrial output in February.

Year-on-year manufacturing and industrial output levels rose, but this wasn’t enough to trigger an outright Pound rally.

The decline in monthly manufacturing levels was the first drop in the reading in almost a year, and was equally blamed on Brexit uncertainty, snow storms and inflation.

Pound Remains Resilient against Australian Dollar (GBP/AUD) despite Downgraded UK GDP Estimate

Another poor data release that the Pound has managed to weather was National Institute for Economic and Social Research (NIESR) GDP estimate for March.

NIESR analysts calculate that UK GDP growth slowed to 0.2% in Q1 2018, compared to 0.3% in Q4 2017.

As with the manufacturing data, this forecast slowdown was partly blamed on cold weather and snow that hit the UK in March.

NIESR Head of Macroeconomic Forecasting Amit Kara stressed that the final reading may be even worse than first expected, saying:

‘Take for example the quarterly GDP growth for the final quarter of 2010 when the UK experienced a prolonged period of extreme cold weather.

‘The economy was initially estimated to have shrunk by 0.5% but subsequent data revisions show that the economy expanded by 0.1% over this period.’

Falling Consumer Confidence Levels Drag Australian Dollar to Pound Exchange (AUD/GBP) Rate Down

As well as low risk sentiment reducing the appeal of the Australian Dollar today, the AUD/GBP exchange rate has also been hit by unsupportive data.

Westpac Bank’s consumer confidence index for April has shown a decline of -0.6%, from 103 points to 102.4.

Although the annual reading has shown a 3.4% rise in confidence levels, AUD traders have been more focused on the more immediate and negative stats.

Pound to Australian Dollar Exchange Rate Forecast: Risk of GBP Volatility on BoE Speeches and UK Jobs Data

There could be further Pound to Australian Dollar gains before the weekend, when Bank of England (BoE) Governor Mark Carney and policymaker Ben Broadbent speak tomorrow.

The two men will respectively give speeches in Canada and Australia, but both could boost demand for the Pound if they hint at UK monetary policy tightening in the months ahead.

A UK interest rate hike from 0.50% to 0.75% is currently unofficially pencilled in for May, so any signs that this is a likely outcome could improve the GBP/AUD exchange rate.

Sticking with central bank news, the Australian Dollar could also be affected by a data release from the Reserve Bank of Australia (RBA) on Friday.

The RBA’s financial stability review could show the Australian economy in a positive light, potentially resulting in a late-week AUD/GBP exchange rate rise.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon