The US election has dominated market trading over the past few days, although the Pound Australian Dollar exchange rate also received a boost from a High Court ruling that could scupper the government’s ‘Hard Brexit’ plans.
High Court Judgement and BoE Freeze Accelerate Pound Australian Dollar Gains
The Pound Australian Dollar exchange rate raced ahead towards the end of the week after the UK’s High Court upheld a challenge against the Government regarding the invocation of Article 50. Unless the decision is overturned by appeal to the Supreme Court, as the government hopes, Parliament will have the chance to vote on the Government’s plans and could force Theresa May to prioritise single market access, lessening the chances of a ‘hard Brexit’.
According to Lord Justice Thomas, one of three judges to preside over the case;
‘In our judgment, the clear and necessary implication from these provisions taken separately and cumulatively is that parliament intended EU rights to have effect in domestic law and that this effect should not be capable of being undone or overridden by action taken by the Crown in exercise of its prerogative powers’
The judgement centred on the fact that leaving the EU would remove rights bestowed upon UK citizens by the European Communities Act of 1972, therefore the government could not do so without the approval of Parliament.
A rate freeze from the Bank of England, along with improved forecasts as part of its inflation report, also buoyed GBP AUD.
Australian Dollar Pound Sterling Charges Last Minute on US Election Twist
Pound Australian Dollar gains have been largely eroded since the start of election week. The Australian Dollar had been pressured lower last week by the news the FBI was again investigating Hillary Clinton’s private email server, used during her time as Secretary of State. Clinton’s lead in the polls collapsed and markets deserted risk assets in favour of currencies like the Pound, desperate to buy bonds such as UK gilts.
This week, however, the FBI has finished assessing new evidence and stated that it does not change the conclusion that it arrived at during the original investigation. With Clinton cleared of any criminal wrongdoing, the Australian Dollar has seen a surge in demand. Markets are confident of a Democratic victory, inspiring risk-behaviour due to the lower odds of extreme market volatility once the election results are announced.
While all currencies are largely unsettled today, with thin trading as a result of reluctant investors unwilling to adjust their positions, the Australian Dollar is facing additional downside pressures from Chinese data. Export growth failed to strengthen as far as forecast, accelerating from 2.2% to 3.2% instead of to 5%.
GBP AUD Exchange Rate Forecast; Will UK Trade Balance Recover?
There will be plenty of domestic sources of volatility for Pound Australian Dollar exchange rates even if the US election manages not to roil the markets. Sterling could find support if tomorrow’s trade balance figures show a falling deficit as predicted, although even falling to the forecast levels leaves the state of UK trade with much to be desired. Australian Dollar movement could come in response to the Chinese consumer price index for October, which is expected to accelerate from 1.9% to 2.1%.
The rest of the week is virtually devoid of notable UK data, with only the RICS house price balance likely to cause any particular movement for GBP AUD. The Australian Dollar may react to Thursday’s consumer inflation expectation, home loans, or investment lending figures, as well as Friday’s US University of Michigan confidence survey results.