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Supreme Court Brexit Ruling Softens Sterling

24 January 2017 by News Desk

The currency market could see some extreme movement this week with a stream of high-profile economic data making its way onto the scene, as well as Brexit political developments taking the limelight in the UK, say currency experts FC Exchange.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast

The pound is going to be put through the wringer this week with important economic data due for release alongside central bank speeches and Brexit developments. The main headline for data will come on Thursday when fourth quarter UK gross domestic product (GDP) figures hit the market. Economists have predicted the annualised number to come in at 2.1%, slightly lower than quarter three’s 2.2%.

Meanwhile, Wednesday will see the usually mildly influential Confederation of British Industry (CBI) business optimism, trends selling prices, and trends total orders numbers released. Investors may pay closer attention to these figures than usual as many eyes analyse the market post-Brexit referendum to determine how the UK economy is coping. If favourable numbers are released, there’s the possibility that sterling could be given a boost.

Bank of England (BoE) Governor Mark Carney is talking in Wiesbaden, Germany on Wednesday as well, and any comments made by the banker that seep into the market could be another source for movement.

The major event for GBP today was the news that the government must seek approval from parliament before Article 50 can be triggered, and the formal Brexit process can be instigated. The pound fell quite significantly against a host of other majors on the news, although recovered somewhat as European trading continued.

Attorney General Jeremy Wright commented: ‘Of course the government is disappointed with the outcome, but we have the good fortune to live in a country where everyone, every individual, every organisation, even government, is subject to the rule of law. So the government will comply with the judgement of the court and do all that is necessary to implement it.’

US Dollar to Australian Dollar (USD/AUD) Exchange Rate Outlook

The US dollar to Australian dollar (USD/AUD) exchange rate is likely to feel some movement on Wednesday when Australia releases its consumer price index (CPI) for Q4. Economists have forecast the annual figure to increase from the previous quarter’s 1.3% to 1.6%, and if it falls in line with forecasts, it could give the Aussie dollar the opportunity to rise.

By way of US data, markets will be eyeing the Q4 gross domestic product and durable goods orders figures due out on Friday. The US GDP figure is expected to fall from 3.5% to 2.2% in Q4, while durable goods orders are expected to make a comeback in December with forecasts of 2.6% following November’s -4.5% contraction.

Euro to Australian Dollar (EUR/AUD) Exchange Rate Predictions

The euro to Australian dollar (EUR/AUD) exchange rate climbed during Monday’s trading, despite Eurozone consumer confidence rising by less than markets had forecast. The commission noted a rise from -5.1 to -4.9, just a shade below the 4.8 experts had predicted. However, even though the figure failed to beat forecasts, it marked the highest reading since April 2015 and suggests the currency bloc’s economic recovery could pick-up in the early part of 2017 – a development which could give the single currency a boost.

Tuesday saw the release of the Markit Eurozone services purchasing managers’ index (PMI) which registered losses in January, falling from 53.7 to 53.6. Meanwhile, the manufacturing PMI for the currency bloc grew from 54.9 to 55.1.

Wednesday will see the release of the IFO’s German business climate, expectations, and currency assessment indexes which may be moderately influential for the euro to Australian dollar (EUR/AUD) exchange rate.

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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