The Pound has dropped by -0.5% against the Australian Dollar today, a significant step back from the rally that occurred at the end of last week.
This has come from rising trader uncertainty about when the Bank of England (BoE) could raise UK interest rates.
Pound Declines on Second Carney Speech
The Pound’s sharp downturn has been caused by a speech from BoE Governor Mark Carney on Monday.
While the Governor continued to back higher UK interest rates in the future, he stressed that a path of higher rates could be ‘gradual’ and ‘limited’.
Both of these words worried traders, some of whom now think that forecasting a November interest rate hike was premature.
Australian Dollar Rises on RBA Minutes
While central bank news has weakened the Pound today, the Australian Dollar has conversely risen on a Reserve Bank of Australia (RBA) release.
This has been the minutes for September. They showed that the RBA is concerned about slow wage growth and a strong Australian Dollar, but otherwise sees national employment as resilient.
Theresa May Brexit Speech to Cause GBP/AUD Volatility on Friday?
For the rest of the week, Pound Australian Dollar exchange rate movement may occur on UK retail sales figures on Wednesday, government borrowing stats on Thursday and a key speech from the Prime Minister on Friday.
The Pound could decline when the retail sales figures come out. This is because forecasts are for a slowdown in most fields, with the exception of annual sales without fuel included.
Further ahead, Thursday morning’s government borrowing stats have also been predicted pessimistically.
On the month in August, the previous borrowing surplus of 0.76bn is expected to fall to a deficit of -6.7bn.
This is not entirely unexpected, given that the previous surplus was only caused by higher tax receipts in July.
Closing UK weekly news, Prime Minister Theresa May will be giving a speech in Florence on Friday. Expectations are that the PM will lay out her plans for Brexit, which could include a pledge to pay a multi-billion Pound ‘EU divorce bill’.
Such an announcement might push the Pound up, as it could raise hopes of the UK getting better treatment by EU officials in Brexit talks.
Unfortunately, there is an elephant in the room – Foreign Secretary Boris Johnson. Johnson made headlines earlier in the week when he put forth a contrasting outlook on Brexit to May, instead of towing the party line.
This could mean that May’s authority is undermined on Friday, diminishing the impact of her message.
Looking at the situation has been Guardian Foreign Affairs writer Natalie Nougayrède;
‘The expectation among Italian officials is that May’s speech will be “positive” and steer clear of radical Brexit ideology. But Johnson’s antics haven’t gone unnoticed.’
‘Will Florence be [May’s] answer? Tuscany…makes for a strange backdrop against which to settle British political scores, but that is how Brexit is mostly viewed in Italy: an internal British dispute gone awry, which, tediously, everyone now has to deal with’.
The last notable Australian news this week will be an RBA bulletin, out early on Thursday. As with the recent minutes, this could provide a near-term economic forecast.