Narrowed Australian Trade Surplus Benefits Pound Australian Dollar (GBP/AUD) Exchange Rate
An unexpected narrowing of the Australian trade surplus helped the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate recover some of its lost ground this morning.
As export volumes saw smaller growth on the month in December than forecast this gave investors fresh incentive to sell out of the risk-sensitive Australian Dollar (AUD).
With global growth looking set to come under increased pressure in the first quarter, thanks to the spread of the Wuhan coronavirus, a further slowdown in trade appears likely.
This left AUD exchange rates biased to the downside, even after Chinese officials announced their decision to cut tariffs on US goods imposed in September.
While the move stimulated a greater sense of market optimism this was not enough to shore up the antipodean currency against its rivals.
Lingering Brexit Anxiety Limits Potential for GBP/AUD Exchange Rate Gains
Even so, support for Pound Sterling (GBP) remained generally muted thanks to lingering anxiety over the UK’s future relationship with the EU.
With just a matter of months left for the two sides to agree a fresh trade deal markets remain wary of the potential for a December cliff-edge scenario.
As long as uncertainty over future trade lingers the appeal of the Pound is likely to prove muted, limiting the potential for GBP exchange rates to recover their lost ground over the coming days.
Unless markets see signs of positive progress towards a mutually agreeable deal the GBP/AUD exchange rate looks set to remain on a relatively weak footing.
Evidence of UK House Price Slowdown Set to Weigh on Pound Sterling
Friday’s Halifax house price index could put additional pressure on the GBP/AUD exchange rate, meanwhile.
Fresh evidence of a slowdown within the UK housing market could add to existing worries over the health of the economic outlook.
Signs that households continued to err on the side of caution in January would suggest a wider deterioration in domestic sentiment, leaving the Pound vulnerable to selling pressure.
With the UK economy looking set to come under further pressure in the months ahead, thanks to the persistent uncertainty surrounding Brexit, any loss of momentum here could weigh heavily on the GBP/AUD exchange rate.
Australian Dollar Braces for RBA Statement on Monetary Policy
Support for the Australian Dollar may falter ahead of the weekend, however, thanks to the release of the Reserve Bank of Australia’s (RBA) latest statement on monetary policy.
If the central bank demonstrates fresh signs of dovishness this could see AUD exchange rates trending sharply lower across the board on Friday.
On the other hand, an indication that the RBA sees less chance of cutting interest rates in the months ahead may offer the Australian Dollar a solid boost.
Any further deterioration in the wider sense of market risk appetite could still help to drag the antipodean currency lower across the board, though, as fears of a global slowdown mount.