Pound Sterling to Australian Dollar Exchange Rate Forecast: Could Westpac Consumer Data Knock GBP/AUD Lower?

Pound to Australian Dollar Exchange Rate Rebounds from Weekly Lows as UK Political Jitters Weaken

UPDATE 2:The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was able to easily recover from Monday’s lows on Tuesday as investors perceived UK Prime Minister Theresa May’s position as being sturdy.

On top of this, the first monthly UK growth report showed that growth had risen to 0.3% in May, though some analysts did express concern about Britain’s continued reliance on the services sector amid Brexit uncertainties.

The Australian Dollar (AUD) was unable to hold its ground as Australia’s June business confidence data from NAB fell short of forecasts, with a result of just 6.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Gains Limited as UK Political Uncertainty Remains

UPDATE: Fissures remaining within the UK government have kept pressure on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate for most of Monday’s session.

While the Australian Dollar (AUD) was supported by US Dollar (USD) weakness and solid Chinese market movement, the Pound’s (GBP) strength was limited by concerns about the UK government.

New UK Brexit Secretary Dominic Raab has been seen as more pragmatic than his predecessor, but there are still concerns that more resignations could follow in the coming days.

Pound to Australian Dollar Exchange Rate (GBP/AUD) Volatility Worsens as Uncertainty Hits Both Currencies

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has already seen relatively wide volatility since markets opened on Monday morning, as investors digested the weekend’s political developments.

Last week, trade war jitters made it easier for GBP/AUD to advance slightly – but the pair remained in the interbank region of AU$1.78.

GBP/AUD briefly touched highs of AU$1.79 on Monday morning, but then dipped back to its lowest levels since last Wednesday. At the time of writing, GBP/AUD was down around 0.3%.

Sterling (GBP) has already had a busy morning, as investors digested Sunday night’s news that UK Brexit Minister David Davis had suddenly resigned.

There are hopes that his resignation could lead to a ‘softer Brexit’ – bolstering the Pound. However, there are also fears that his resignation will weaken UK Prime Minister Theresa May’s own Brexit position, or even lead to a leadership challenge

Pound (GBP) Exchange Rates Mixed as Investors Anticipate UK Political Developments

Demand for the Pound (GBP) was limited on Monday morning as investors awaited signs of how the resignation of Brexit Secretary David Davis would affect the UK government, and its Brexit plans.

Davis had been one of the Cabinet members advocating a clean break with the EU, so his resignation bolstered hopes that a softer Brexit may be ahead.

However, political analysts warned that there may be further resignations following Davis, or that UK Prime Minister Theresa May could face a leadership challenge from MPs supporting a harder Brexit.

As of the time of writing, investors were cautiously optimistic.

This morning ex-Housing Minister Dominic Raab was appointed as the new Brexit Secretary, and Davis made comments suggesting he was generally confident in Theresa May’s ability as Prime Minister

His comments indicated that, for now at least, he did not plan to push for a leadership challenge. On the subject of a potential challenge, he said:

‘It is the wrong thing to do,

If I’d want to bring down Theresa May, now is not the time. It would have been after the election when we were weakened and so on.’

Australian Dollar (AUD) Exchange Rates Supported by Global Factors

Following last week’s decent Australian ecostats, the Australian Dollar (AUD) has found support on Monday with the latest financial news from the US and China.

While concerns about the US-China trade war remain a significant downside risk in AUD trade and have limited the risky currency’s appeal, the currency has also held above its lows thanks to other factors.

Last week saw the publication of the latest US non-farm payroll results, which indicated wages were lower than expected. This led to weaker US Dollar (USD) trade, which the Australian Dollar benefitted from.

The ‘Aussie’ also benefitted from a rebound in Chinese financial markets, as China is Australia’s biggest trade partner.

The news further indicated that investors were not yet hugely concerned about the US-China trade war, but trade jitters have still limited AUD demand.

Pound to Australian Dollar (GBP/AUD) Forecast: UK Political Developments and Growth Stats in Focus

While a new Brexit Secretary has already been appointed, there is still uncertainty in markets about whether fallout from Davis’s resignation will blow over quickly, or if it will escalate into something more.

There are mutterings from political analysts and MPs about the possibility of a leadership challenge, which would certainly undermine the Pound (GBP) with significant uncertainty if it were to happen.

On top of this, the new Brexit Secretary Dominic Raab is an outspoken Brexit supporter, causing markets to speculate that a ‘soft Brexit’ may not be more likely after all.

As well as political and Brexit developments though, key data due in the coming sessions has the potential to influence GBP/AUD movement.

Tuesday will see the publication of Australia’s June business confidence survey from NAB, as well as Britain’s May trade balance and production results.

The most influential report of the day however, will be Britain’s May Gross Domestic Product (GDP) report. It will be the first UK monthly growth results, following the switch from quarterly figures.

Westpac’s July consumer confidence figures for Australia, as well as a speech from Bank of England (BoE) Governor Mark Carney, could influence the Pound to Australian Dollar (GBP/AUD) exchange rate later in the week.

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