The Pound dropped heavily against the Australian Dollar at the start of the week thanks to the comments made by Prime Minister Theresa May over the weekend.
The Australian Dollar, meanwhile, has been supported by some good news – the expectation that billions will come into the economy from mining exports.
Last week, the interbank Pound Australian Dollar exchange rate progressively worsened, starting at a high of around 1.71 and ending Friday at 1.68.
Heavy GBP Decline Sparked by Fears of ‘Hard Brexit’
The Pound slumped notably across the board after the weekend’s developments.
The biggest source of damage to Sterling was PM Theresa May’s interview for Sky News, her first interview of 2017.
Although May’s statements were designed to be unspecific, this did not stop investors from drawing some startling conclusions from her words, which had potentially negative implications for the UK economy going forward.
The key statement was that;
‘People talk […[] as if […] we are leaving the EU but we still want to […] keep bits of membership of the EU. We are leaving. We are coming out. We are not going to be a member of the EU any longer’.
This triggered an immediate response from investors and sent the Pound plunging as May’s words were interpreted as meaning that a ‘Hard Brexit’ with no single market access was imminent.
Australian Economic News Focused on Rising Permits & Exports Bonanza
Monday morning saw the release of a positive Australian building permits figure, which showed improvement. Further support for AUD was provided by expert forecasts which predicted that mining and energy exports will total around $204bn this year, providing a major national economic boost.
GBP AUD Exchange Rate Forecast
This week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of UK trade balance and production stats on Wednesday, as well as Thursday afternoon’s National Institute of Economic and Social Research (NIESR) GDP estimate.
Closing UK news on Friday will be a speech from Bank of England (BoE) official Michael Saunders.
In terms of Australian news, Tuesday will see retail sales and national confidence stats announced. Iron ore price fluctuations will also be a cause of AUD movement.
Positive UK news may give GBP a slight lift but investors are more likely to be concerned with the latest Brexit developments.