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Aussie Forecast to Climb Higher Versus US Dollar (AUD/USD), GBP/USD Registers Big Fall

31 August 2017 by FC Exchange

Sterling has registered its largest monthly fall against the US dollar (GBP/USD) since November, and the Commonwealth Bank of Australia has a positive outlook for the Aussie dollar, say currency specialists FC Exchange.

The Commonwealth Bank of Australia (CBA) has suggested that the Aussie dollar may reach levels of US85¢ by the close of 2018, a bullish forecast that resides above Bloomberg’s US80¢ expectation. The AUD/USD prediction comes after significant US dollar weakness. President of the United States Donald Trump was expected to take office and begin making tax cuts, increasing infrastructure spending, and introducing other stimulatory policies. As a result, it was expected the US dollar would be flying high this year, not flailing in uncertainty.

In a note to his clients, CBA chief currency strategist Richard Grace commented: ‘We had temporarily changed our US dollar depreciation view on December 9th because Trump campaigned on pro-growth policies; in particular, significantly lowering the US company tax rate.’

Meanwhile, the pound hasn’t ended August well, noting its biggest monthly decline against the US dollar (GBP/USD) since October, as well as weakening against the euro (GBP/EUR) and Australian dollar (GBP/AUD).

Brexit was to blame for sterling’s weakness as negotiations ended in acrimony. It seems that the UK and EU are at loggerheads in the third round of talks with Michel Barnier, the EU’s chief negotiator, saying the negotiations were ‘far from seeing sufficient progress.’

UK Prime Minister Theresa May had hoped the raft of position papers published recently would speed up talks so that a trade deal could be discussed, but markets are continuously disappointed by progress.

Industry expert Shilen Shah commented: ‘The risk of a no transitory agreement seems to have increased today given the strong words from Barnier. The key hazard for markets is that today’s disagreement is an indicator of where future negotiations are heading, with the danger that the risk premium on UK assets will widen if the talks imploded with no agreement.’

As a result of the political uncertainty, GBP/EUR has been trending lower, in the region of 1.0843.

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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