The Pound to Australian Dollar exchange rate advanced to a new two-month-high in the wake of the Reserve Bank of Australia’s (RBA) unsurprising interest rate decision.
Pound (GBP) Fluctuating Amid Supreme Court Appeal
Pound movement has been limited since markets since markets opened this week as Britain’s Supreme Court has been embroiled in an appeal with the UK government.
The UK government wishes to challenge a ruling made by the High Court that it is unconstitutional for the government to activate Article 50 and begin the Brexit process without the ratification of Parliament.
As a result of the ongoing talks, Sterling has failed to continue last week’s impressive uptrend. The Pound didn’t even derive much benefit from Markit’s November services and composite PMIs, which both printed at an impressive 55.2 – a score that would have given the Pound a sturdy boost in the days before the Brexit vote.
Australian Dollar (AUD) Slips on Expectations of Slower Growth
Despite tempered risk appetite, the Australian Dollar was able to strengthen ahead of the last RBA meeting of 2017.
Taking a generally neutral tone and leaving policy frozen as expected, the RBA delivered no real surprises.
The biggest takeaway from the meeting was that the bank expects the Australian economy to slow slightly towards the end of the year, though the RBA did not seem hugely concerned by this and offered no indication that further easing was on the way.
Regardless, the Australian Dollar still dipped after the announcement, allowing GBP/AUD to advance. This was partially due to profit-taking, but also speculation that the Australian economy would be contracting towards the end of 2016.
GBP/AUD Forecast: Did Australia’s Economy Contract in Q3?
The Pound to Australian Dollar currency pair could be set for more gains this week if Wednesday’s Australian Gross Domestic Product (GDP) results for Q3 reveal a contraction – as some analysts now expect will be the case.
Following the RBA’s dovish tone on late-2016 growth and the overall disappointing results seen throughout the third quarter, investors are now preparing for Australia’s Q3 growth results to show the nation’s first contraction in 5 years.
If Tuesday’s Q3 GDP results come in below 0% the Australian Dollar may well perform poorly over the rest of the week.
Demand for the ‘Aussie’ will also be limited if its higher-risk rivals, like the New Zealand Dollar, look comparatively appealing.
As for the Pound, with no result due for the Supreme Court hearing until the New Year, any Supreme Court-inspired dovishness may ease.