Pound Sterling Australian Dollar Exchange Rate Update: Brexit Uncertainty Pressures GBP/AUD
UPDATE 13:29 BST: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has extended its losses to around 0.4% this afternoon as investors continue to shy away from the Pound (GBP) in the face of growing Brexit uncertainty.
At the same time the Australian Dollar (AUD) has befitted from an upswing in market risk appetite, driven by the recent weakness in the US Dollar (USD).
GBP/AUD Exchange Rate Tumbles Following Sharp Upswing in Australian GDP
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is back on the defensive this morning as stronger-than-expected domestic GDP figures helped to bolster the ‘Aussie’.
At the time of writing the GBP/AUD exchange rate has fallen around 0.2% from this morning’s opening levels, with the pairing relinquishing a portion of Tuesday’s gains.
Australian Dollar (AUD) Exchange Rate Buoyed by Solid GDP report
The Australian Dollar (AUD) accelerated against the Pound (GBP) and many of its other peers during the Asian session on Wednesday as investors welcomed Australia’s latest GDP figures.
According to data published by the Australian Bureau of Statistics (ABS), GDP rose by 1% in the first quarter of 2018.
This was up from a revised 0.5% growth in the final quarter of 2017 and outpaced forecasts of a 0.9% rise, helping to bolster the appeal of the Australian Dollar.
The jump in growth appeared to be largely driven by increased exports, with mining exports in particular helping to accelerate Australia’s economic expansion.
However despite the jump in growth a number of economists expressed concern that this is not being translated into inflation and increased wages, something which may hamper spending as well as the long-term outlook for the Australian Dollar.
Tom Kennedy, Global Fixed Income Strategist at JP Morgan said:
‘Today’s result is strong, though it does not change our view that Australia’s longer run growth prospects remain challenged and less upbeat, with household consumption to remain hamstrung by benign wage growth.’
With the Reserve Bank of Australia (RBA) frequently indicating that an acceleration in wage growth would be a requirement for any monetary tightening, the dour outlook would suggest the bank is still some way off its next rate hike.
Brexit Cloud Hangs Over Pound Sterling (GBP) Exchange Rate
At the same time the Pound Sterling (GBP) exchange rate is struggling to build off Tuesday’s gains today as markets begin to fret over the EU summit taking place later this month.
This has reignited concerns over Brexit and the apparent lack of progress that has been made in recent negotiations, with investors fearing the EU summit will not result in a breakthrough, leaving a cloud of uncertainty to continue to hang over Sterling.
Analysts at MUFG said:
‘While yesterday’s data is good news for the Pound, it can’t be viewed in isolation to the Brexit risks that are becoming a more dominant influence on the outlook for the economy.
We remain sceptical over Pound gains on positive macro news until we have clarity from the government on Brexit.’
GBP/AUD Exchange Rate Forecast: Slide in Domestic Trade Surplus may Pressure Aussie
Looking ahead the GBP/AUD exchange rate may mount a recovery on Thursday as Australia publishes its latest trade balance figures.
Economists forecast April’s figures will reveal Australia’s trade surplus narrowed from AU$1.5bn to AU$1bn, potentially dragging on the Australian Dollar (AUD).
Meanwhile the Pound may advance tomorrow with the release of the UK’s latest housing data, as analysts predict house prices will have rebounded last month, after slumping 3.1% in April.