The Pound Australian Dollar (GBP/AUD) exchange rate traded in a wide range on Friday as markets react to reports the US and China may be close to resolving their trade dispute.
Australian Dollar (AUD) Exchange Rates Bolstered by Trump Trade Remarks
The Australian Dollar (AUD) leapt higher during the Asian session on Friday as the risk-sensitive currency strengthened amid reports US President Donald Trump had asked his cabinet to draft a possible trade agreement with China.
According to Bloomberg, Trump is hopeful that a trade agreement can be reached with China at the G20 summit of nations in Argentina later this month.
The report came hot on the heels of a tweet from Trump in which he spoke of a ‘long and good’ phone call with Chinese President Xi Jinping with an ‘emphasis on Trade’.
This led to investor’s shunning safe-haven currencies such as the US Dollar (USD) and flocking to riskier currencies, particularly the trade sensitive ‘Aussie’.
However the Australian Dollar began to relinquish some of these gains with the start of the American trading session following the release of the latest US labour figures.
The US Bureau of Labour Statistics reported that US non-farm payrolls leapt from 118,000 to 246,000 in October, blasting past forecast of a more modest rise of 183,000 and helping US unemployment hold at a 49-year low.
This resulted in the US Dollar recouping some ground on Friday afternoon, prompting risk-appetite to ease and prompting the Australian Dollar to slip back.
Pound (GBP) Exchange Rates Steady Following Construction PMI
Meanwhile Following Thursday’s surge, trade in the Pound (GBP) was more subdued at the end of the week following the release of the UK’s latest construction PMI.
According to data published by IHS Markit, the UK saw a jump in construction activity last month, with October’s index rising from 52.1 to 53.2, beating forecasts of a modest slide to 52.0.
However while the headline numbers beat expectations analysts warned that some weak fundamental point to a possible contraction in the months to come.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said:
‘Optimism was at its lowest level for six years, as the sector remained stifled by client hesitation, fears about the health of the UK economy and continued Brexit uncertainty, resulting in slower growth of new orders and purchasing.
‘These results point to the sector getting stuck in the mud as we approach March 2019, and with ongoing supplier delays and stock shortages, the sector may not be able to respond quickly enough anyway should there by a sudden upturn in fortunes.’
GBP/AUD Exchange Rate Forecast: RBA To Strike More Upbeat Tone in Light of Trade Optimism?
Looking ahead to next week, movement in the Pound Australian Dollar (GBP/AUD) exchange rate through the first half of the session looks set to be dominated by the Reserve Bank of Australia’s (RBA) latest rate decision.
No policy changes are expected form the bank this month but the meeting may still result in the ‘Aussie’ opening the week on strong footing if the bank is willing to strike a more hawkish tone as in light of a more stable trade outlook.
Meanwhile the release of the UK’s latest Services PMI might give Sterling a slight boost at the start of the session in activity in the UK largest wealth generating sector ticked higher in October as expected.
However the main catalyst for the Pound next week looks set to be the release of the UK’s third quarter GDP figures in the tail end of the session.
This may ultimately see the GBP/AUD exchange rate accelerate next week, if the jump in consumer spending over the summer is reflected in stronger economic growth in the third quarter.
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