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Political Uncertainties Cause GBP/AUD Fluctuations

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.

Key Events

5th March

Australian Services PMI

12:30 Australian Building Permits

09:30 UK Services and Composite PMI

6th March

12:30 Australian Retail Sales

03:30 RBA Policy Decision

7th March

12:30 Australian Growth Rate

8th March

12:30 Australian Trade Balance

9th March

09:30 UK Trade Balance

09:30 UK Industrial and Manufacturing Production

09:30 UK Consumer Inflation Expectations

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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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