Uncertainty about Donald Trumps Plans for Future US-UK Metal Tariffs Fails to Prevent GBP/AUD Exchange Rate Advance

UPDATE 13:15 BST: Pound Sterling (GBP) has extended its lead against the Australian Dollar (AUD) today, rising by 0.5% in the pairing.

This appreciation comes despite the danger of a full-blown trade war breaking out between the US and EU, following the recent imposition of metal tariffs.

There may be growing hopes that because the US could a major reduction in exports to the EU, the metal tariffs might be toned down in response.

Surprise Rise in UK Manufacturing Activity Pushes GBP/AUD Exchange Rate Higher

The Pound (GBP) has firmed against the Australian Dollar (AUD) today, rising by 0.3%.

Historically speaking, because of recent Pound Sterling losses this represents a recovery for GBP, which is at its highest level only going back to 30 May.

May’s UK manufacturing sector reading showed growth instead of the predicted slowdown, although some analysts think it is only a temporary expansion.

GBP/AUD Exchange Rate Gains Limited by US Metal Tariffs on UK Exports

Elsewhere, Pound Sterling (GBP) traders have been unsettled by US tariffs against EU metal exports (which include the UK) going into force.

There were hopes that these charges against steel and aluminium exports to the US would be avoided through negotiation, but the extended deadline has since passed.

The general international reaction has been one of condemnation, while in the UK Trade Secretary Liam Fox has said:

‘In the case of the United Kingdom, where we send steel to the United States that is vital for their businesses and their defence industry, it is patently absurd.’

Australian Dollar to Pound Exchange Rate (AUD/GBP) Dips as AU Manufacturing PMI Falls

As in the UK, there has also been significant manufacturing sector data from Australia recently; this came in as negative and showed a reduction in the reading for May.

The AIG manufacturing index has fallen from 58.3 points in April to 57.5 points; though it is worth noting that this still indicates growth in the sector, just at a slower pace.

Pound to Australian Dollar Exchange Rate Forecast: Will GBP/AUD Rise on UK Services Sector Growth?

The coming week will bring a handful of high-impact UK data releases, although the Pound to Australian Dollar (GBP/AUD) exchange rate will most likely be affected by PMI stats.

These are out on Monday and Tuesday, respectively covering the construction and services sectors.

Both readings are predicted to show growth, although Pound Sterling (GBP) traders will primarily be looking at the services reading as an indicator of UK economic stability.

If the services PMI rises as forecast then the Pound could advance against the Australian Dollar (AUD); a strong services PMI can cancel out shortfalls elsewhere.

Next week’s Australian announcements will include a Reserve Bank of Australia (RBA) interest rate decision on Tuesday, and GDP growth rate stats on Wednesday.

RBA policymakers aren’t expected to adjust rates, but could still cause an AUD advance if they hint at tighter monetary policy later in 2018.

With the GDP readings, a faster pace of growth is predicted on the quarter and the year, which might lead to a mid-week AUD/GBP exchange rate rise.