AUD Forecast – Will Sterling’s Recent Upturn Continue? (Matthew Vassallo)

GBP/AUD rates are trading around 1.78 on the exchange this morning, with the AUD seemingly finding support around this level.

The Pound has found a foothold above 1.75 over recent weeks, with investor confidence seemingly returning to the Pound despite the on-going uncertainty around Brexit.

Whilst the Pound has made positive inroads of late, the current trend may not be sustainable as we head into a key phase of the Brexit talks.

Poor UK Manufacturing data yesterday did little to further boost Sterling’s value, with the Pound struggling to make any impact above 1.78 against the AUD.

With the global markets seemingly improving , there is also an argument to say that investors risk appetite will improve alongside it. Usually this means than they will move funds from the safer haven currencies such as the USD & CHF, into more risky and potentially higher yielding currencies such as the AUD or NZD.

It is interesting to note that the USD has declined of late in line with this theory and it could be that the AUD is in line for a positive run over the coming weeks.

Whilst the currency markets are extremely difficult to dissect, particularly in times of uncertainty, I am not convinced that Sterling will continue on an upwards aggressive curve.

The Australian economy continues to perform well and being a commodity based economy, relies heavily on the export of its vast supply of raw materials. With its largest trading partner China showing no signs of an economic slowdown, this is likely to help support the Australian economy and ultimately the AUD over the coming months.

The Reserve Bank of Australia (RBA) will not want to see the AUD’s value soar, of fear of alienating their trade partners but this undertone is likely to be offset by the on-going concerns surrounding Brexit and its outcome.

These concerns were laid bare by a leaked Government report earlier this week, which indicated that the UK will be worse off after Brexit. The report covered all three Brexit scenarios, including a free trade agreement, access to the single market, or the worst case scenario of no deal being reached at all.

The Government were quick to react and said the findings were only a preliminary assessment but the news is hardly likely to inspire confidence amongst investors.

Therefore despite the Pounds positive run  further pressure over the coming days and weeks is a distinct possibility, as  Brexit talks starting to dominate the headlines once more.

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