Although GBP AUD closed out last week trending slightly higher than it began, this week is already shaping up to be a poor one for the Pound, with the currency recording losses as markets reopened after the weekend.
The Australian Dollar, meanwhile, has rallied against peers on the news that iron ore prices are continuing to trend favourably.
Pound Weak on Concerns about Future UK Inflation Pressures
The only UK reports published on Monday detailed rising business optimism and falling industrial orders figures, but Pound movement has once again been dictated by ‘Brexit’ related worries.
The main headline has been that Prime Minister Theresa May has called a summit with devolved national leaders in order to discuss what kind of tone ‘Brexit’ negotiations should take.
Concerns have already been raised about how the meeting will turn out, with Scottish representatives in particular making their desire to either stay in the EU or keep single market access outside of the EU known.
Elsewhere, pricing action from Microsoft has sparked fears that we may see extreme business reactions to ‘Brexit’; in the face of a massively weakened Pound, the company has hiked its UK prices for some services and products by 22%.
Australian Dollar Benefits from Consistent Iron Ore Prices
While no data has come from Australia yet this week, the ‘Aussie’ has still managed to rally against its main peers thanks to two pieces of positive news.
The first has been that the cost of iron ore, a key Australian export, has remained at a 6-week high for the second week in a row. The latest price jump is thought to have come from a drop-off in output from a number of Australian mining companies, which has driven up costs on remaining supplies.
The second good news for Australia has come from a CommSec missive reporting that the state of New South Wales has remained the best-performing in Australia.
GBP/AUD Exchange Rate Forecast
This week, Pound Sterling/Australian Dollar exchange rate movement could follow Australia’s inflation data and the UK’s GDP Q3 growth figures and consumer confidence stats.
Australia’s inflation rate is expected to edge up from 1% to 1.1%, which may see the ‘Aussie’ record additional gains against the Pound.
Further GBP AUD losses could also occur if the preliminary UK Q3 GDP results fall as forecast. Friday’s GfK consumer confidence figure has a similarly pessimistic decline on the cards. As of Monday morning, the interbank Pound Australian Dollar exchange rate sat at 1.60, just up from the pairing’s recent multi-year lows.