The Pound to Australian Dollar exchange rate tumbled to a three-week low last week despite Sterling exhibiting strength against other majors.
Even the assertion of a Bank of England (BoE) official that the central bank should discuss tapering quantitative easing (QE) in the near future was not able to help the Pound hold against a strong ‘Aussie’. GBP/AUD fell from 1.6942 to 1.6715 last week and edged higher on Monday.
Sterling Slips as Brexit Talks Resume
Last week hopes that the Bank of England (BoE) will soon begin discussing winding back its quantitative easing (QE) package lend the Pound support.
However, as several high-ranking BoE officials remain cautious, the Pound was unable to hold its ground against the ‘Aussie’.
The latest Sterling weakness comes amid fresh political and Brexit uncertainties. Although the Pound was initially bolstered by the Government’s acceptance of the fact it would have financial obligations to the EU after exiting, concerns over growing discord within Britain’s Conservative government worsened during the weekend.
Brexit negotiations are back in focus this week. Analysts and officials expect that negotiations will centre on UK and EU citizen rights in the aftermath of the Brexit process.
There is also speculation that the UK and EU will not be able to complete negotiations within the proposed two-year deadline, but any signs that a transitional deal may be instated could support the Pound.
Australian Dollar Benefits from US News
The Australian Dollar put in a solid series of gains last week, supported by strong Australian confidence surveys, increased consumer inflation expectations and the rising price of iron ore, Australia’s biggest export.
On Friday, US inflation and retail sales stats disappointed traders. As a result, the odds of the Federal Reserve raising US interest rates for a third time before the end of 2017 have fallen.
The latest drop in Fed rate hike bets bolstered demand for higher-risk currencies, benefiting both the Australian and New Zealand Dollars.
The ‘Aussie’ continued to see robust demand on Monday due to sturdy Chinese growth stats, with China being Australia’s biggest trade partner.
GBP/AUD Forecast: RBA Meeting Minutes Ahead
The Pound to Australian Dollar exchange rate may have struggled last week, but the pairing could stage a rebound over the next couple of days.
A dovish set of minutes from the Reserve Bank of Australia’s (RBA) latest policy meeting may send the Australian Dollar falling, while strong UK inflation stats would increase pressure on the Bank of England (BoE) to revise fiscal policy.
Thursday will also be a key session for the GBP/AUD exchange rate, as investors will react to Australia’s June job market report and Britain’s June retail sales stats.