The Pound has seen a strong rally against the Australian Dollar which has been largely driven by the Trump victory. Rates for GBP/AUD are almost 10 cents higher than one month ago which has presented an excellent opportunity to buy Australian Dollars. However the Aussie has staged a small come back following Chinese data yesterday which came in strong as expected.
Employment data in Australia on Thursday is another on to watch and could create some added volatility for the Aussie which should give us some clues as to how well the Australian economy is performing.
The markets are becoming aware of the potential for a trade war between China and the US which is creating uncertainty for the Australian Dollar considering that China is Australia’s largest export market. The Aussie has found support though following a spike in global commodity prices which has come about from expected new infrastructure spending in the US under President-elect Donald Trump. The Reserve Bank of Australia minutes released overnight were upbeat and point to a “positive outlook for growth in the Australian economy” which is a positive for the Dollar.
Global uncertainty and the prospect of higher interest rates in the US are likely to see the Aussie weaken further. It is possible that Federal Reserve Chair Janet Yellen may leave her position before her term at the Fed completes in 2018. Donald Trump has criticised the US Federal Reserve for keeping interest rates low at President Obama’s request, so there could be some trouble ahead between those two figures. It would suggest that a rate hike from the Fed this December could still be on the cards. A move like this would be good for the US Dollar but negative for the Australian Dollar. As such a move to 1.70 for GBP/AUD could be on the horizon in the coming weeks.
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