The AUD has lost some ground against Sterling overnight, with the pair trading 1.85 during Wednesday morning’s trading.
The AUD has come under pressure lately, having found plenty of support around and below 1.80 for long periods.
The Pound itself has had a very positive week following a strong run of UK economic data. Investor confidence in the Pound soared as UK Unemployment figures fell, Retail Sales figures exceeded expectation and there was even a nod from the Bank of England (BoE) that they may look to hike interest rates over the coming months.
This positive feeling was cemented as reports regarding a Brexit transitional deal surfaced. These reports were later confirmed, with the UK & EUR all but agreeing the terms of the deal, which included access for the UK to the single market & customs union during the two year period.
This positive sentiment helped support Sterling’s rise against the AUD, which itself has come under increasing pressure of late in line with a slowdown in global growth.
Investors have been pulling their funds away from riskier assets such as the AUD, with fears that President Donald Trump’s imposed tariffs on imported goods good have a serious knock on effect for the global economy. As regular readers will know the Australia relies heavily on sustainable global growth to boost its export driven economy and any slowdown inevitably has a negative knock on effects for the AUD.
With US/China trade wars also impacting investors risk appetite, particularly as China demand for Australian goods & materials is so essential to the Australian economy, the AUD may struggle to make any sustained impact back to or below 1.80 against Sterling in the short-term.
Whilst Brexit fears have not completely subsided, with many questions regarding future trade relationship’s still to be answered, I would be tempted to protect any AUD currency positions and avoid the risk of further downturns.
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