Currency forecasters at Nordea Markets are tipping the GBP/AUD exchange rates to fall. This is good news for traders in the Australian dollar, not so much for those hoping to gain on the upside however. The forecasters are suggesting that commodity prices may rebound which would lead to the suggestion of the AUD gaining on the GBP. GBP/AUD rates held steady over the festive season as the UK markets reacted to the UK PM’s cap on the UK-EU ‘transition period’.
Pound Sterling Still Jittery Over Brexit Negotiation Cap
The pound’s investors are still on edge at the prospect of a cliff-edge Brexit resulting in a no-deal between the UK and the EU by the end of the year. A few weeks ago, Boris Johnson announced that there would be a hard cap on the EU negotiations which would mean that a deal must be reached by December 2020 or else the UK would leave the EU without a deal. Dean Turner, UK economist at UBS Global Wealth Management mentioned that the UK is set for a deterioration in market optimism throughout the New Year. He mentioned that there may be a bounce in activity surrounding the clarity on Brexit, but sentiment improvement is likely to fade as the December Brexit deadline draws closer.
Last week saw no influential UK economic data being released which meant the attention was focused on post-Brexit speculation. The outlook appears clearer, but the vital factor will be if a trade deal can be negotiated during the transition period.
Australian Dollar Rates Suffer as Tensions Between the US and Iran Rise
Meanwhile, for the Australian dollar, the tensions between Iran and the US grew as US President Donald Trump ordered air-strikes on Iran. This was a blow for the risk-averse Aussie as traders fled to safe-haven currencies like the Swiss franc and the US dollar. The AUD had previously received support after news of the US-China trade deal progress, but the new tensions seemed to be unraveling this optimism. Olivier Jakob, managing director of Petromatrix, was downbeat about the situation stating that it increased the geopolitical risk premium. The holiday period was meant to be a break for traders but now many will be cutting these holidays short and calling for emergency risk meetings.
With mentions of commodities on the rise, the AUD could be set to gain but only if this is the case. If the price of gold rises however, the AUD could potentially gain on the GBP, tipping the exchange rate in the favour of the Aussie dollar.
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