Sterling | Australian Dollar Quarterly Forecast - January - March 2018 Australian Dollar rises back up after better economic data - Visa Bureau
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Sterling | Australian Dollar Quarterly Forecast
January - March 2018
Australian Dollar rises back up after better economic data
Sterling still treading water
GBP-AUD Forecast
Australian Dollar rises back up after better economic data
The Australian Dollar ended the year on a somewhat gloomy note
thanks to a number of factors, which include:
- The Australian central bank maintaining the monetary policy status
quo, resulting in a dampening effect on the AUD;
- Volatility in commodities markets and the Chinese economy (with
which Australia and the Aussie Dollar are inextricably linked);
- Economic factors such as the Australian housing market;
- Australia’s own unusual political events; and
- Disappointing Australian economic growth.
A ray of light appeared in December 2017, however, as the Reserve Bank
of Australia (RBA) seemed to be approaching future monetary policy
decisions with a slightly less tentative stance. That prompted murmurs
of potential interest rate changes in 2018. Combined with positive
economic data in the form of improved Australian retail sales and
renewed business confidence, the Aussie Dollar seemed to be gathering
strength again. This was followed by impressive jobs data, which has
helped to push the Australian Dollar back up.
2 Sterling | AUD Quarterly halofinancial.com
Sterling still treading water
Sterling improved in recent months and since has been treading water
and riding the waves made by other world currencies for the most
part, as the UK awaits further clarity on the outcomes of the Brexit
negotiations. Every glimmer of progress or negative comment on Brexit
has the potential to cause considerable volatility for the Pound, despite
robust economic data continuing to be released for the UK and business
optimism across many sectors. There are some negatives in the data
though, as new car sales slumped in 2017 and December’s retail sales
data produced the 5th December fall in a row.
The Pound has been over-bought for the short-term, but even so, the
darkest days for Sterling look like they are behind us…
This New Year quarterly report examines how the GBP-AUD currency
exchange rate has fared over the past three months and looks ahead to
the coming months and the rest of 2018 to see what may be in store for
this currency pairing.
Aussie Dollar rises and falls…
Changes in the Chinese market have been keenly felt by the Australian
Dollar due to its status as a commodity linked currency. Regulatory
change concerning the mining and production of metals in China has
meant tighter supplies of some of Australia’s major exports, including
aluminium, iron ore and copper. This has pushed prices up significantly.
With commodities having been priced relatively low for some time,
the momentum has picked up noticeably at the start of the year and
prices keep climbing. The higher the prices, the bigger the boost to
the Australian export market, and therefore the stronger the Australian
Dollar becomes. The caveat to this could be the RBA taking action
to undermine AUD strength in order to keep Australian exports
competitive, so it is unlikely the Australian Dollar will climb too high in
the medium term.
3 Sterling | AUD Quarterly halofinancial.comThe RBA has been cautious until now and is in a tricky position –
employment and investment remain strong, suggesting there is no
reason to raise interest rates, yet consumers are feeling the squeeze of a
lack of real wage growth in the face of increasing household debt, along
with high property prices. With the current “softly, softly” approach,
unless there is a dramatic change in Australia’s economic situation, it
could be argued that the Aussie monetary policy is not going to change
any time soon.
A key indicator of Aussie economic strength is the Australian Trade
Balance data, which was released overnight: a surplus is always a
plus for the AUD, but a trade deficit dampens demand. The majority
of forecasts were for an increasing surplus, yet the Australian Trade
balance actually fell into deficit, weakening the Australian Dollar against
its major currency pairings.
We have been surprised by both the RBA and Australian Dollar
performance in the past, however – sending ripple effects across global
currency markets – so it would be wise not to count your chickens over
the coming months…
GBP-AUD Forecast
4 Sterling | AUD Quarterly halofinancial.comGuidance for AUD buyers
GBP-AUD broke the downtrend in November 2017 and the Pound
pushed up towards the 1.80 level, which it briefly hit in December. Since
then, this pair has been correcting lower and has broken the shorter
term upward trend. The downside target appears to be 1.7080 but there
are evidently GBP buyers around the A$1.72 support. If this pair does
make it below A$1.71, there is a strong chance we will see a rebound
from there. It is worth considering targeting 1.74 and 1.78 levels on
the AUD buying side depending on your timeframe and risk appetite.
A break below 1.7000 would be bearish and open the likelihood of a
deeper correction to 1.66.
Guidance for AUD sellers
The GBP-AUD rate is eight cents below the highs we saw December
and, in the short term, this may well be the window of opportunity
AUD sellers needed. A dip to 1.7080 is possible and anything below
there would most likely trigger a larger drop to 1.66. However, the
Pound is looking oversold at this level and there are clearly GBP buyers
happy to pile into the market at 1.72 or thereabouts. If the Pound does
bounce from here or from a dip to 1.7080, there is scope for a break
above 1.74 and further rallies from there. Protecting your medium term
requirements against such a break through the use of automated orders
may well be your best option.
5 Sterling | AUD Quarterly halofinancial.comGet in touch
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