Provide a detailed justification for your chosen strategy.

Ex Ante Carry trade strategies
Use currently available economic and financial information as well as the past history of the carry trade opportunities and the carry trade relating to the two currencies being analyzed in order to design a carry trade strategy for a future period starting now. Provide a detailed justification for your chosen strategy.

My own idea:
In the part 1, my teammate has calculated the Carry trade profit in past 10 years, in my part, I found the past 10-year annual growth rate of Australia and United Kingdom, then I make a chart of the difference of GDP growth rate between AUS and UK. It is very similar between GDP growth difference and carry trade profit chart. (all the charts will be uploaded as attachment part_4_draft.docx).

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Structure (800 words in total):
1.Find the similar point of GDP growth difference and carry trade profit, then make assumption: the 2-country macroeconomic performance can influence the carry trade profit
2.Try to explain the reason: my own thinking is, Australias GDP growth is higher, then the interest rate will be relatively high comparing to UK, and the reserved bank will try to make exchange rate stable to keep the economic growth, then there is carry trade opportunity etc (you can use any other evidence to explain the similar chart mentioned before, please make some reference about market condition or macroeconomic analysis for UK and AUS )
3.Make a forecast and explain why carry trade strategy is available: the future GDP growth rate is provided in part_4_draft.docx, forecasted by world bank. AUS GDP growth is higher than UK, so carry trade has profit.

Appendix: What is a ’Currency Carry Trade’, the trading strategy
A currency carry trade is a strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.




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