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AUD/USD, AUD/GBP Exchange Rate Forecast Weekly Review

27 March 2017 by News Desk

The Australian dollar had an interesting week following the Reserve Bank of Australia’s (RBA) warning about the Australian housing market, say industry experts FC Exchange.

AUD/GBP, AUD/USD Dented by Housing Market Concern

The Australian dollar to US dollar (AUD/USD) exchange rate slipped by around 0.4% following the RBA minutes from the march policy meeting, which showed concern over the ‘build-up of risks associated with the housing market’.

Australian interest rates are currently residing at 1.5% – a record low, which is encouraging the property boom and increasing household debt. The RBA is in a predicament as it attempts to balance economic growth with a housing market bubble – lifting rates would cool the property market but be detrimental to economic progression. Australia has successfully registered 25 consecutive years of growth with no recession, and is around six months away from stealing the longest-running modern era record from the Netherlands.

GBP Resilient Following London Events, Rising on Retail Sales

Despite a devastating week for Britain, the pound managed to climb higher against other majors following the release of upbeat UK retail sales numbers. Retail sales rose by 3.7% in February on the year, marking a healthy 1.4% rise on the month.

Office for National Statistics senior statistician Kate Davies said: ‘February’s retail sales figures show fairly strong growth, though the underlying three-month picture shows falling sales as February’s figures follow two consecutive months of decline in December and January. The monthly growth in February is seen across all store types. The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months.’

Economists had been concerned that spending would slow dramatically following the EU referendum as the UK was plunged into unchartered waters.

Meanwhile, inflation jumped and spurred speculation that the Bank of England (BoE) would be hiking interest rates in the near future. The February reading showed the UK consumer price index jumped to 2.3% year-on-year following January’s 1.8% reading – the first time it’s breached the BoE’s 2.0% target since 2013. In comparison, late last year inflation was lethargically residing at around 0.9%. It’s unlikely the Bank of England will make immediate or rash decisions when it comes to the bank rate, but if inflation continues to be high in the months ahead, it’s likely that rate rise speculation will increase.

US Dollar Loses Trump-Bump

The US dollar has been losing its shine after months of rallying and unrivalled strength. The US dollar slipped to a two-month low against a variety of majors following Trump’s healthcare debacle and failure to deliver a significant election campaign promise.

Barclays senior strategist Shin Kadota commented: ‘Concerns towards the Trump administration have been reignited after his healthcare legislation setback. This is resulting in a bout of risk aversion weighing on the dollar. There isn’t much going for the dollar right now and the market will be bracing for it’s further decline.’

The USD exchange rate has shed a substantial proportion of its 7% gains made following Donald Trump winning the election. Trump had promised to boost growth and inflation as a result of new fiscal policies.

Additionally weighing on the greenback is the prospect of two rate hikes by the US Federal Reserve, rather than the three expected.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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