GBP/AUD Exchange Rate Forecast: Brexit Uncertainty Weighs on Pound, Australian Dollar Trading Higher

Will the GBP/AUD Exchange Rate End 2017 on a Downtrend?

The Pound to Australian Dollar exchange rate could be on track to round off the year on a low note, with decent UK data failing to give the Pound a notable boost amid Brexit concerns.

Pound Sterling (GBP) Exchange Rate Gains Limited by Brexit Concerns

While recent UK data has generally come in higher than expected, investors are too anxious about how Brexit negotiations will unfold throughout 2018 to buy into Pound Sterling (GBP) exchange rates.

This week, EU officials have taken a relatively strict stance on what kind of deal Britain will be able to achieve.

EU chief negotiator Michel Barnier, for example, argued that the City of London was unlikely to be given any special post-Brexit treatment in the EU financial sector.

This concerned investors hoping for London to maintain its status as the financial capital of Europe.

On Wednesday, Sterling saw additional Brexit-related pressure. The EU stated that any potential Brexit transition period would need to conclude by the end of 2021 at the latest.

The International Monetary Fund (IMF) took a cautious outlook on Britain’s economy too, saying that the process was having a negative impact on the economy.

The IMF also stated that the planned time frame for the second phase of Brexit negotiations was ‘ambitious’.

Australian Dollar (AUD) Exchange Rates Supported by Reserve Bank of Australia (RBA) Optimism

The Reserve Bank of Australia’s (RBA) latest meeting minutes report was published on Tuesday morning and has been lending Australian Dollar (AUD) exchange rates support, with markets pleased to see the bank take a more optimistic tone than expected.

Despite recent uncertainty on Australian inflation and wages, the bank showed rising confidence that Australia’s economy would see further strength in 2018.

In particular, the bank predicts that Australian employment growth will be above average in 2018. This boosted hopes that wage growth will improve over time.

While the bank remained concerned about inflation and household consumption, the bank’s overall confidence boosted speculation that the RBA could start considering a rate hike.

Although the risky Australian Dollar’s strength has been limited slightly this week due to focus on US tax reforms, GBP/AUD gains have been limited.

GBP AUD Exchange Rate Forecast: UK Growth Stats Ahead

The Australian Dollar is likely to be influenced by risk-sentiment and commodity news over the coming week, amid a lack of notable Australian data.

Sterling movement could be influenced in the coming days by UK ecostats, including November’s public sector net borrowing report.

Friday’s UK data in particular has the potential to affect the Pound outlook if final Q3 Gross Domestic Product (GDP) results or business investment figures surprise investors.

Stronger-than-expected UK growth data would boost demand for the Pound on hopes that Britain’s economy is performing slightly better-than-expected.

As 2017 draws to an end and market activity quiets over the holiday period, it’s unlikely that GBP/AUD will see much in the way of major movement in the coming sessions.

That said, any notable changes in the outlook for Brexit negotiations still has the potential to shock GBP/AUD traders.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard