Markets Prepare for Key EU Withdrawal Bill Vote – Pound Australian Dollar (GBP/AUD) Exchange Rate Falls
The Pound Australian Dollar (GBP/AUD) exchange rate stumbled on Wednesday, falling as investors prepared for a House of Commons showdown over how much of a say MPs should have in the Brexit process.
This tussle is essentially between the Commons and the House of Lords, and focuses on what will occur if the UK government does not achieve an exit deal with the EU.
Tory rebels are pushing for Parliament to have the power to intervene in negotiations, but the government insists that doing so would bind UK Prime Minister Theresa May’s hands.
James Slack, the PM’s spokesman outlined the government’s stance:
‘Agreeing to amendable motions would allow Parliament to direct government on its approach to exiting the EU, binding the Prime Minister’s hands and making it harder to secure a good deal for the UK.’
This fracture, combined with a clear lack of progress in the Brexit negotiation process, continued to weigh on the Pound.
Market Risk Appetite Improves – Australian Dollar (AUD) Exchange Rates Shrug off Gloomy Growth Forecasts
The Australian Dollar (AUD) clawed back some of its recent losses on Wednesday, rising as investors sold off safe-haven assets and returned to riskier, commodity-based investments.
Surprisingly, this rally occurred despite yesterday’s dovish Reserve Bank of Australia (RBA) minutes and a rather gloomy Westpac growth forecast, released today.
Westpac’s six-month annualised growth rate index – a measure of economic activity in relation to trend growth – dropped sharply in May, falling from 0.23% to -0.22%.
This result pointed to slowing growth over the second half of 2018, with the May index marking the weakest levels seen since September last year.
In other news, RBA Governor Philip Lowe is set to speak today at the central banking conference in Sintra, Portugal, and given the current cautious stance of the central bank it seems unlikely that he will have anything hawkish to say.
Indeed, if Mr Lowe does prove cautious in sentiment then we could see the Australian Dollar to Pound Sterling exchange rate tumble.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: BoE Rate Decision in the Spotlight
The main event for the Pound (GBP) this week will be Thursday’s Bank of England (BoE) rate decision, with investors waiting with bated breath to see if the bank will lay the groundwork, or even hint at a rate hike in August.
Analysts are hopeful that the Q2 economic recovery of the UK and the ongoing strength in the labour market will push the bank towards a rate rise, but concerns remain regarding uncertainty in the face of Brexit negotiations and the spectre of a global trade war.