Update 3: Pound to Australian Dollar Exchange Rate Edges Lower Before Speech from BoE’s Carney
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate edged lower as the European session started and investors looked ahead to today’s speech from Bank of England (BoE) Governor Mark Carney.
If Carney shows some optimism about the recent progress in Brexit negotiations, Sterling could climb, but any remarks which support the expectation that borrowing costs will remain lower for longer would be Pound-negative.
Update 2: GBP/AUD Slips, Pound Sterling Exchange Rates Fall from Best Levels
Although the GBP/AUD exchange rate had a steady start to trading on Tuesday, the Pound later slipped against the Australian Dollar as EU Brexit negotiator Michel Barnier asserted that London would lose its financial passport if the UK left the single market.
Later today the Australian Dollar could experience further movement in response to the publication of the Westpac Leading Index for November. An improvement in the measure would be Australian Dollar-supportive and could weaken the GBP/AUD exchange rate.
Update 1: GBP/AUD Holding Monday’s Gains
The Pound Sterling to Australian Dollar exchange rate is so far holding Monday’s gains on hopes surrounding Theresa May’s plans for Brexit.
The GBP/AUD exchange rate remained up on the week’s opening levels following the publication of minutes from the Reserve Bank of Australia’s (RBA) latest policy meeting.
The minutes showed that policymakers were confident that unemployment would continue falling, but that there was also uncertainty on how far and when improved growth would feed through to inflation and wage growth.
According to the minutes; ‘Growth in employment, particularly full-time employment, had increased and the unemployment rate had fallen to a four-year low. Although wage growth had been a little lower than expected in the September quarter, it appeared to have stabilised at a low rate. Leading indicators of labour demand had been broadly consistent with continuing strength in the labour market. In these circumstances, spare capacity in the labour market was expected to be absorbed gradually and wage growth was expected to pick up over time.’
First Meeting to Discuss Government Brexit Aims Boosts GBP/AUD Exchange Rate
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was pushed higher on Monday thanks to news that Theresa May will brief the Cabinet regarding her plans for Brexit.
GBP AUD had risen 0.2% to trend in the region of 1.7443.
Prime Minister Theresa May meets with her ‘Brexit Cabinet’ today in order to discuss plans for the UK’s divorce from the European Union.
This will see UK officials finally discuss what kind of relationship the UK is seeking with the EU after Brexit has been completed, as the Cabinet has so far only focussed on immediate issues like the ‘divorce bill’.
GBP AUD exchange rates had declined sharply across the course of last week, tumbling from their highest levels since just after the referendum to a one-month low on Friday.
This was because EU officials approved moving Brexit talks onto the next stage, but also that talks would be incredibly difficult and were unlikely to start until March.
Australian Dollar Exchange Rates Soften as Government Downgrades GDP Forecasts
Rising risk-appetite boosted the Australian Dollar last week as markets became wary of the US Dollar ahead of policy announcements from the US Federal Open Market Committee (FOMC).
Also providing support for the ‘Aussie’ currency was a strong set of labour market data, with November’s employment change report showing that the number of people employed rose over threefold forecasts at 61,600.
Today Australian Treasurer Scott Morrison has released the government’s mid-year economic outlook, with the mixed set of projections proving a drag on the Australian Dollar overall.
On a positive note, the latest figures show that the government is expected to run a smaller budget deficit during the current financial year than projected earlier.
Predictions are now for a shortfall of –AU$23.6 billion in the 2017-18 fiscal period; an improvement of –AU$5.8 billion on May’s estimate.
However, the government has also lowered its growth forecasts and signalled that strength in the labour market is unlikely to filter through to wage growth.
GDP in the current fiscal year is expected to clock in at 2.5% this year – down from 2.75% forecast in May - and at 3% in the 2018-19 year.
Wage growth is predicted to register at 2.25% this fiscal year and at 2.75% in the 2018-19 period.
GBP/AUD Exchange Rate Forecast to See Volatility as Cabinet Discusses Brexit Plans
Theresa May’s meeting with her Brexit Cabinet could still cause much volatility today, as getting the various factions to all back the same plan could prove problematic.
There are already splits in the Cabinet, with chief Brexiters Boris Johnson and Michael Gove facing off against pro-remain Philip Hammond.
The only data left for release today is the ANZ Roy Morgan weekly consumer confidence index for last week.
Given that minutes for the December Reserve Bank of Australia (RBA) policy meeting are released shortly after midnight tomorrow, the sentiment data could be largely ignored.
Even the latest policy minutes are unlikely to cause much turbulence, with Westpac observing;
‘There is less interest in the minutes than usual given that since the meeting, we have seen the quarterly statement (notably lower inflation projections) and heard RBA speeches.’
On Wednesday a speech from Bank of England (BoE) Governor Mark Carney could create volatility for the Pound, as could Thursday’s GfK consumer confidence figures and government borrowing data.
Data Affecting This Week’s GBP/AUD Exchange Rate Forecast
19th December 00:30 AUD RBA Dec. Rate Meeting Minutes
20th December 13:15 GBP Carney Speaks at Parliament Hearing in London
21st December 00:01 GBP GfK Consumer Confidence (DEC)
21st December 09:30 GBP Public Sector Net Borrowing (NOV)
22nd December 09.30 GBP Gross Domestic Product (YoY) (3Q F)