GBP/AUD Forecast: Pound Australian Dollar Exchange Rate Muted as Carney Warns UK Weakened by ‘Brexit Effect’

Dour Remarks from Carney Leave GBP/AUD Subdued

After stumbling on Thursday the Pound to Australian Dollar (GBP/AUD) exchange rate remains subdued this morning following warnings from the Bank of England’s (BoE) Mark Carney.

At the time of writing GBP/AUD remains close to today’s opening levels, after falling around half a cent yesterday afternoon.

Pound (GBP) Muted as Carney Warns of ‘Brexit Effect’

The Pound is struggling to recoup yesterday’s losses against the Australian Dollar following a warning by Mark Carney on the impact of Brexit on the UK economy.

Carney suggested that uncertainty over Brexit continues to dent economic growth in the UK and that Britain is now lagging behind as the rest of the global economy speeds up.

Talking to the BBC in Davos Carney said:

‘The economy is doing not as well as we expected it to prior to the referendum, what it works out to is tens of billions of pounds lower economic activity.’

‘Investment has picked up a bit but it hasn’t picked up anyways to the same extent as internationally.’

However Carney also told the BBC that as markets are given ‘greater clarity’ over what Brexit will look like, then the UK economy is likely to fall back into line with the global economy.

Carney also suggested that the closer the UK’s post-Brexit relationship with the EU, the better it will be for the UK economy.

However, given the government’s refusal to endorse UK chancellor Philip Hammond’s suggestion of only ‘very modest’ changes to the UK-EU relationship post-Brexit, such an outcome looks unlikely.

Rebound in US Dollar (USD) Cuts Australian Dollar’s (AUD) Advance Short

Meanwhile the Australian Dollar’s attempts to advance last night came to an abrupt halt as a rally in the US Dollar (USD) caused investors to shy away from the ‘Aussie’.

The jump in the US Dollar came after comments from President Trump yesterday evening when he contradicted earlier comments from Treasury Secretary, Steven Mnuchin, and called for a strong US Dollar.

Trump said that Mnuchin’s recent remarks that he ‘welcomed’ a weaker US Dollar were ‘taken out of context’, and he talked about the US becoming economically strong again.

In an interview with CNBC yesterday Trump said:

‘The Dollar is going to get stronger and stronger and ultimately I want to see a strong Dollar.’

GBP/AUD Exchange Rate Forecast: Uptick in Manufacturing PMI to Bolster Sterling?

Looking ahead to next week the GBP/AUD exchange rate may trend higher again in the second half of the session as the UK publishes its latest Manufacturing PMI.

Economists forecast that the index will show manufacturing activity gathered pace in January, possibly strengthening the Pound.

Meanwhile there is scope for the Australian Dollar to see support next week as analysts predict domestic business confidence will have strengthened in December.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail