The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been met by increased volatility today following reports of a possible rift at the top of the UK government.
GBP AUD is currently at around AU$1.7637, down from a high of around AU$1.7725 struck earlier this morning.
Pound Sterling Exchange Rates Tumble on Fresh Brexit Concerns
Sterling beat a hasty retreat this morning as reports emerged of a possible cabinet revolt lead by Boris Johnson and Michael Gove, further complicating Theresa May attempts to salvage a Brexit deal.
According to media reports the Eurosceptic faction of government increasingly fear that the PM will deliver a ‘soft’ Brexit, complaining that they were not consulted on her promise of some ‘regulatory alignment’ over the Irish border.
A cabinet source told the Daily Telegraph; ‘It seems that either Northern Ireland is splitting from the rest of the UK or we are headed for high alignment with the EU, which certainly hasn’t been agreed by Cabinet. The Prime Minister is playing a risky game.’
The news of a possible cabinet rebellion looks set to place even more roadblocks in the way of the UK’s exit agreement, which was torpedoed on Monday by the DUP’s rejection of proposals for Northern Ireland to remain part of the EU customs union.
This has led to increased fears that the UK will fail reach a deal before the EU summit on the 14th, possibly delaying trade discussions until sometime in 2018 and placing further pressure on the GBP AUD exchange rate.
Australian Dollar Pressured by Disappointing GDP figures
The Australian Dollar meanwhile remained tempered today by the release of Australia’s latest GDP figures earlier this morning.
According to data published by the Australian Bureau of Statistics (ABS) domestic GDP fell from 0.9% to 0.6% in the third quarter, falling below expectations that growth would hold at 0.7%.
The slowing of growth appeared to be largely attributed to weaker household consumption, with retail sales in particular having suffered over the summer.
Some analysts even expressed concerns that this downturn in consumption could persist in the coming quarters.
Sally Auld, head of FX strategy for Australia and New Zealand at JP Morgan said; ‘Compositionally, today’s print is not a good number. Outside of private investment, most components were soft, especially consumption.’
‘It is probably too early to say that this is the beginning of a new trend, but given the unsavoury mix of headwinds facing the consumer at present, alarm bells should be ringing.’
GBP AUD Exchange Rate Forecast: Brexit to Continue to Weigh on Sterling?
Looking ahead movement in the GBP AUD exchange rate is likely to continue to be dominated by Brexit sentiment over the coming days, with investors likely to shy away from the Pound unless some positive headway is made towards finalising the UK’s exit agreement.
Meanwhile the Australian Dollar could struggle to stabilise in overnight trade on Wednesday as economists forecast that the latest domestic trade figures will show that the country’s trade surplus narrowed from AU$1.7bn to AU$1.3bn in October.