Risk Aversion causes GBP/AUD to Drop on ‘Hard Brexit’ Fears
17 January 2017 by News DeskThe Australian dollar exhibited softness against the euro (AUD/EUR) and US dollar (AUD/USD) in Monday’s trading but managed to clamber higher against the pound (AUD/GBP) as sterling plunged to some of its lowest levels in three months on fears the UK is in for a ‘hard Brexit’, say currency market experts FC Exchange.
AUD/GBP Climbs as Markets Price in Bumpy Brexit
Risk sentiment largely determined market movement during Monday’s European trading as investors awaited a speech from UK Prime Minister Theresa May. UK paper, The Telegraph, published an article over the weekend stating that May would be outlining the case for what’s known as a ‘hard Brexit’ on Tuesday which left sterling vulnerable in the market.
A ‘hard Brexit’ would likely see the UK leave the European Union and Single Market entirely and potentially begin a relationship on World Trade Organisation (WTO) rules. The pound took a beating against other majors in anticipation of the speech on Tuesday and announcement from the Supreme Court due this week regarding the Article 50 appeal which took place in December.
Meanwhile, in positive news for the UK, the International Monetary Fund (IMF) u-turned further on its UK growth forecast for 2017. Following the Brexit vote the IMF had been rather pessimistic with its predictions, but in recent months the institute has raised growth forecasts twice, with Monday’s improved reading ticking higher by 0.4 percentage points to reach 1.5%.
The latest UK inflation stats are due for release early in Tuesday’s European trading which may cause some GBP/AUD exchange rate movement.
AUD/EUR Awaiting Australian Labour Market Data
Meanwhile in the Eurozone, the single currency traded in a tight range with the Aussie dollar (EUR/AUD) following trade balance data for the euro area. The November balance of trade reading came in higher than forecast with a €25.9B surplus, following October’s €20.1B after exports surged. The ecostat falls adds further support to economists’ suggestions that the currency bloc experienced a pick-up in growth in the final quarter of 2016 after a rather disappointing year of economic progress.
Tuesday is likely to see some euro movement with the release of the German and Eurozone ZEW surveys. Thursday’s Australian employment change and unemployment rate numbers are likely to cause some EUR/AUD exchange rate swings.
AUD/USD Exchange Rate Forecast to Swing on Trump Inauguration
The US dollar to Australian dollar (USD/AUD) exchange rate was trending lower in Monday’s stateside trading as the greenback held its ground against other currency majors. This week is likely to be an interesting one for the buck as president-elect Donald Trump is inaugurated on Friday 20th. However, some comments from Tump regarding NATO and the ‘One China’ policy saw gold surge in popularity reaching its highest level for seven weeks. Much like the pound, the US dollar is likely to fluctuate on the back of political developments in the immediate future. As investors’ risk appetite falls amid so much political change and uncertainty many ecostats may be rendered less powerful in catalysing market movement, even if printing positively.
By way of data, the US consumer price index for December is set to be published in Wednesday’s North American trading.
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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