The Pound to Australian Dollar exchange rate firmed ahead of this week’s UK Supreme Court judgment, but following the decision GBP investors were slightly disappointed. Concerns about a potential second Scottish independence referendum rose and GBP AUD failed to hold its best levels.
Pound (GBP) Fails to Benefit from Supreme Court Ruling
While many analysts expected Sterling to advance if the UK Supreme Court upheld last year’s High Court ruling, the British currency instead fluctuated near the day’s opening levels against the ‘Aussie’.
The Supreme Court agreed with the High Court that Article 50 should be out to a Parliamentary vote.
However, the details of the ruling disappointed as Supreme Court judges did not believe Scottish, Welsh and Northern Irish governments needed a say in the vote.
As a result, markets perceived an even greater chance that Scotland First Minister Nicola Sturgeon would move towards giving Scotland a second independence referendum. This has increased concerns that the Pound could face a crisis if Scotland withdraws from the UK.
Australian Dollar (AUD) Weakened by Threat of US Trade Cuts
Despite mixed demand for the Pound on Tuesday, Australian Dollar weakness was more consistent due to widespread concern that US-Australasia trade was going to face significant obstacles under the Trump Presidency.
In his first days in office, US President Donald Trump signed executive orders withdrawing the US from TPP talks.
Trump had stated on his campaign trail that stricter trade tariffs would be implemented for global trade and with anti-globalist policies seemingly being prioritised by the new government, trade-reliant regions like Australia are likely to take a hit.
As a result, risk-sentiment has slumped this week and the Australian Dollar has weakened significantly.
GBP/AUD Forecast: Australian Inflation Stats Ahead
Key domestic ecostats are likely to influence the Pound to Australian Dollar exchange rate for the remainder of the week.
Wednesday’s Asian session will see the publication of Australia’s Q4 Consumer Price Index (CPI) results, which are expected to print solidly. If these impress, they could support AUD trade slightly.
Later in the week, Britain’s Q4 Gross Domestic Product (GDP) results will be published and are predicted to have slipped slightly from the previous figures. If they impress, Sterling is likely to increase its gains.
Of course, the latest developments from the new US Trump administration are also likely to influence risk-sentiment and the Australian Dollar.
If Trump looks set to continue focusing on protectionism and anti-trade actions, investors will rush to ‘safe haven’ currencies like the Japanese Yen (JPY).
As for Brexit developments, investors will now be eager to see what action Scotland and Northern Ireland’s governments will take and if they will protest or challenge the Supreme Court ruling.