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GBP/AUD Outlook Heavily Dependent on US-China Trade Negotiations

Last week’s high: A$1.833

Last week’s low: A$1.819

 

GBP/AUD Exchange Rate Beholden to the Performance of the US Dollar (USD)

The Pound Australian Dollar (GBP/AUD) exchange rate could remain beholden to the performance of the US Dollar (USD) this week, with markets continuing to ride the rollercoaster of the US-China trade spat.

US President Donald Trump instructed officials to consider an additional $100bn tariffs against China last week, an escalation that spooked markets once again.

This news came shortly after US economic advisor Larry Kudlow downplayed the tariff threats as simply being a negotiation tactic, a perspective that could still hold true.

Indeed, if China capitulates and agrees to confront the issue of intellectual property theft and lower their trade barriers then the US tariff response could be minimal, or entirely absent.

Nonetheless, until agreement (or a move in that direction) is achieved the US Dollar is liable to continue to come under pressure, effectively allowing the Australian Dollar to siphon demand.

In other news, markets will have the UK’s balance of trade reading to assess, as well as a whole host of private sector performance statistics and the NIESR GDP estimate for Q1 2018.

With the 2018 Great Britain and Ireland ‘cold wave’ beginning in February and worsening into March it is possible that these readings could be hamstrung due to the severe weather – something that was reflected in the recent Markit PMI results (which were specific to March).

Moreover, the NIESR GDP estimate could also reflect the poor performance of the UK’s services sector in 2018, with many economists predicting that GDP will have been adversely affected.

As a result, volatility could continue throughout the week.

 

Australian Business Confidence and RBA’s Lowe Speech Ahead – AUD Exchange Rate Forecast

Whilst this week is rather quiet for UK data, markets will have Australia’s business and consumer confidence indexes to chew over, as well as the AIG construction index and a speech from Reserve Bank of Australia (RBA) Philip Lowe.

After last week’s rather dovish rate decision and minutes from the RBA it is unlikely that Lowe’s statements will be hawkish (if he discusses monetary policy at all), nonetheless, markets will be keen to assess his latest perspective on the state of the Australian economy, with increased optimism liable to put GBP/AUD under pressure, and ongoing caution liable to give GBP/AUD a shot in the arm.

The Westpac consumer confidence reading and NAB business confidence reading will follow suit, but with the threat of a global trade war seeming to dominate, it is highly likely that business confidence could have taken a hit during the past month.

Key Events – Week Starting April 9th

Monday

12:30 AUD AIG Construction Index (Mar)

14:00 AUD TD-MI Inflation Gauge (Mar)

Tuesday

14:30 AUD NAB Business Confidence (Mar)

Wednesday

09:30 GBP Balance of Trade (Feb)

09:30 GBP Construction Output (Feb)

09:30 GBP Manufacturing Production (Feb)

09:30 GBP Industrial Production (Feb)

13:00 GBP NIESR GDP Estimate (3M Mar)

13:30 AUD Westpac Consumer Confidence Index (April)

16:45 AUD RBA Gov Lowe Speech

 

James Baxter

Currency Trader

Tel: 01442 892062

 

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