Fears of a Trade War Help GBP/AUD Recovery despite Brexit Uncertainties
Towards the end of last week, the US President Donald Trump announced hefty tariffs on US imports of major materials such as steel and aluminium. This shocked markets with the President later even commenting that the US could ‘easily fight and win a trade war’.
The US government’s increasingly tough stance on protectionism weakened risky trade-correlated currencies like the Australian Dollar. For the ‘Aussie’, it was only the latest in a series of concerns dragging the currency lower as recent Australian data has also been unimpressive.
Due to a low market appetite for risky currencies, GBP/AUD was able to recover slightly from weekly lows despite broad uncertainty about the Brexit process.
Investors are concerned that a ‘hard Brexit’ may still be possible due to recent disagreements between the UK and EU. UK Prime Minister Theresa May’s speech on Friday did little to reassure investors as she continued to state that the UK would be leaving the EU single market.
AUD Outlook: Reserve Bank of Australia (RBA) to Influence AUD Outlook
Could the Pound continue to recover against the Australian Dollar despite Brexit concerns this week? That will largely depend on Tuesday’s Reserve Bank of Australia (RBA) policy decision.
The RBA will hold its March policy decision on Tuesday, and investors are highly anticipating the bank’s outlook on the Australian economy following recent disappointing ecostats and the US trade tariff news.
If the bank expresses concerns over the US President’s trade tariff decisions, the Australian Dollar could remain weak and this could make it easier for GBP/AUD to rise even amid Brexit uncertainty.
As for data, UK services stats on Monday and Australian growth stats on Wednesday could influence GBP/AUD. Uncertainties surrounding Brexit and trade tariffs could remain in focus however.
Australian Services PMI
12:30 Australian Building Permits
09:30 UK Services and Composite PMI
12:30 Australian Retail Sales
03:30 RBA Policy Decision
12:30 Australian Growth Rate
12:30 Australian Trade Balance
09:30 UK Trade Balance
09:30 UK Industrial and Manufacturing Production
09:30 UK Consumer Inflation Expectations
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