Update: GBP/AUD Exchange Rate Slides as Tusk Warns Brexit will ‘Complicate’ UK-EU Trade
The Pound to Australian Dollar (GBP/AUD) exchange further extended its losses this afternoon as Brexit concerns continued to weigh on the pairing.
The release of the EU’s draft guidelines for Brexit trade talks has applied considerable pressure to the Pound exchange rate, with GBP/AUD now down by around 0.5%.
Concerns over possible fiction in the upcoming trade talks were further increased by EU Council president Donald Tusk’s suggestion that Brexit would ‘loosen, not strengthen, economic ties’.
GBP/AUD Fluctuates as Australian GDP Suggests RBA Likely to leave Rates on Hold in 2018
The Pound to Australian Dollar (GBP/AUD) exchange rate was met by considerable volatility during today’s session when Australia published its latest gross domestic product (GDP) figures.
At the time of writing GBP/AUD is down 0.4% from its opening levels, although it is still trading close to the same levels as Tuesday afternoon.
Australian Dollar (AUD) Rocked by Decline in GDP
The Australian Dollar saw large swings in movement against the Pound and most other major currencies on Wednesday as Australia released its latest GDP data.
According to data published by the Australian Bureau of Statistics (ABS) domestic GDP rose by 0.4% in the fourth quarter of 2017, down from a revised 0.7% in the previous quarter.
This was behind expectations of more robust growth of 0.6% and led annualised growth to strike 2.4%, missing forecasts of 2.5% growth last year.
ABS reports that the slowdown in GDP was largely driven by reduced construction activity and weaker exports, which offset a notable rebound in consumer spending.
Analysts suggest that the slowdown in growth will likely reinforce the Reserve Bank of Australia’s (RBA) cautious approach to interest rates this year.
Felicity Emmett, Senior Economist at ANZ Bank said:
‘We are reluctant at this stage to extrapolate the weakness into 2018, and continue to expect a strengthening of growth this year. The weakness in wage growth confirms that the RBA is likely to be on hold for some time yet.’
Pound (GBP) Crumbles as EU Brexit Guidelines Published
Despite striking higher in the wake of Australia’s GDP figures the Pound found itself falling back quite quickly during the European session on Wednesday.
A draft document from the EU suggested that any trade deal would likely be limited by the red lines drawn by the UK government, and that there would be no ‘cherry picking’ of single market access for certain sectors.
While European Council president Donald Tusk insisted that the EU ‘does not want to build a wall’ the apparent hard-line stance struck by the document made it difficult news to swallow for some.
The guidelines must now be approved by the remaining 27 members of the union when EU leaders gather for a summit later in March.
GBP/AUD Exchange Rate Forecast: Australian Trade Data to Bolster ‘Aussie’?
Looking ahead the GBP/AUD exchange rate may slide in overnight trade as Australia publishes its latest trade balance figures.
Economists forecast that after racking up a trade deficit of around –AU$1.3bn at the end of 2017, Australia’s will report a surplus in January.
Although the surplus is expected to be very modest, it may still prove to be enough to help propel the Australian Dollar exchange rate higher.
Meanwhile the UK will release its own trade figures on Friday, with GBP investors hopeful that a narrowing of the domestic trade deficit will help trigger a rally in the Pound.