EU Referendum the Key Factor behind The Pound’s Weakness (Daniel Johnson)

AUD to GBP Exchange Rate Moves to December Highs with UK Lockdown

Sterling is currently in a weak position due to a combination of poor data releases and the EU referendum. I think AUD is currently over valued and Sterling may have a small rally if figures improve over the coming months. I do not think there will be any significant strength for Sterling however until after the EU referendum provided the UK remains in, If a Brexit were to occur I would expect Sterling to fall considerably in value. Current FT polls show 43% of the UK population wish to remain in the EU, 38% against and the remainder undecided.

If you are selling Australian Dollars  however I would be tempted to move, We have seen several unpredicted large falls in the Chinese Stock market over the last few months. If the China’s growth continues to slow monetary policy could be changed and Australia could well follow suit in which case Sterling could strengthen significantly. Keep in mind that GBP/AUD was at 2.20 not so long ago, it now sits at 1.94. By holding out for small gains, you are making your self susceptible to large losses.

Upcoming Key Data Releases

Australian Interest Rate  Decision – Tuesday 1st March at 3.30am will see the Australian Interest Rate Decision. I would be surprised to see any movement at this point but we will also hear the Reserve Bank of Australia Rate Statement which could indicate interest rate strategy going forward. Keep a close eye on this as this could influence tie value of GBP/AUD.

Wednesday 2nd March at 00.20am is the release of Australian GDP figures, GDP is a key barometer as to the health of an economy. I expect a slight increase which could cause Australian dollar strength.

Thursday 3rd March at 00.30am will be Trade Balance Figures. This is key to the state of the Australian Economy due to its heavy reliance on raw material export and will give an indication as to how well the trade relationship with China is going. I expect a decline which could weaken the Aussie.

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