The Australian dollar is in for a volatile ride this week as the markets await policy announcements from the US. The protectionist nature from Trump is spooking the Aussie which has helped see a good jump higher for GBP/AUD. Although the new administration’s policies will impact the US Dollar they will also have a direct impact on the Australian dollar as it is heavily impacted by events both in the US and China. If the US dollar is at a turning point then so too could be the Aussie.
Any more big decisions from the US could have a negative impact on Australian exchange rates if for example funds start to return to the US to invest in Trumps expected infrastructure projects.
The recent talk of a trade war between the US and China must also be a big concern for Australia so it is no surprise that Australia will be commencing preparatory trade talks with the UK this week. Australian treasurer Scott Morrison said “Discussions during this visit will begin laying the foundations for Australia to strike new beneficial trade and investment arrangements with the UK that benefit our businesses, exporters and citizens.”
Australian Consumer Price Index inflation numbers for the fourth quarter are released on Wednesday which are expected to hold steady at 0.7%. This data is likely to be discussed at the next Reserve Bank of Australia (RBA) meeting which 07/02/17. Inflation has been edging higher and it is seems unlikely the RBA will look to cut interest rates with the recent rise in commodity prices. House prices are also seen as at a very high levels which is another reason for the RBA to not cut.
With the Supreme Court ruling expected later this morning GBP/AUD is likely to see major volatility and new direction for this pair. The outcome this morning is likely to carry with it many implications for the United Kingdom as a whole and may present hurdles for the government for Brexit to actually happen which is likely to create a lot of political uncertainty in the coming months.
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