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GBP/AUD Fails to Hold Gains on Brexit Uncertainties

Last week’s high: AU$1.8097

Last week’s low: AU$1.7921

Strong Commodity Prices Keep Australian Dollar Buoyant

Despite some speculation that the UK could remain in an EU customs union following Brexit, the Pound to Australian Dollar exchange rate was unable to sustain gains last week and closed relatively closely to the week’s opening levels.

Sterling has seen limited support due to Britain’s underwhelming economic outlook, as well as uncertainties surrounding the Brexit process.

The latest concerns revolved around the EU customs union. Some reports suggested the UK government planned to keep the UK in a new customs union following Brexit, but the UK government has continued insisting that the UK will be leaving the EU customs union. This uncertainty is limiting Sterling demand.

The Australian Dollar, on the other hand, has remained surprisingly resilient despite the recent broad strength of the US Dollar (USD). This has been due to strong prices of major commodities like iron ore and oil bolstering the appeal of the risky commodity-correlated Australian Dollar.

AUD Outlook: UK Inflation and Trade Developments in Focus

Ever the hot topic, news regarding trade talks between the US and China, will continue to influence risky trade-correlated currencies like the Australian Dollar next week.

Optimistic developments in trade talks will likely make the Australian Dollar more appealing, especially as China is Australia’s biggest trade partner.

However, Australia’s domestic economic calendar is looking a little quieter. As a result, the Pound is more likely to be driving GBP/AUD movement next week.

Major UK ecostats will be published throughout the week, starting off with April inflation figures on Wednesday, followed by retail data on Thursday and growth projections on Friday.

The week’s most influential report will be UK inflation, as the data could have an impact on Bank of England (BoE) interest rate hike bets if it surprises investors.

Key Events

23rd May

02:30 Australian Construction Work

09:00 RBA Governor Lowe Speech

09:30 UK Inflation Rate

24th May

01:30 Australian Westpac Leading Index

09:30 UK Retail Sales

25th May

09:30 UK Growth Rate

09:30 UK Business Investment

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To keep up to date with the Australian Dollar, visit the AUD blog in our Currency News section.

James Baxter
Senior Currency Broker
T: 01442 892 062

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