GBP/AUD Exchange Rate Softens Amid Brexit Customs Worries
UPDATE: The latest Brexit developments left the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate on a weaker footing as chief EU negotiator Michel Barnier dismissed Theresa May’s customs proposals.
As Barnier ruled out the option set forth in the Chequers white paper the mood towards Pound Sterling (GBP) naturally soured, with May likely to struggle to secure support for an alternative suggestion.
With the UK and EU apparently at a fresh impasse the GBP/AUD exchange rate softened, reflecting market concerns over the likelihood of any imminent progress towards a deal.
GBP/AUD Exchange Rate Continues to Benefit From Risk Averse Trading
UPDATE: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continued to push higher on Thursday afternoon, despite lacking the support of any fresh UK data.
AUD exchange rates extended their slump as the US Dollar (USD) rallied strongly, even as the latest US advance goods trade deficit widened.
As markets remain wary of the potential for global trade tensions to flare up investors saw little reason to buy into the Australian Dollar.
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Pushes Higher in Spite of Positive Australian Data
Better-than-expected second quarter Australian import and export price indexes failed to dent the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate.
While the export price index beat forecasts of a contraction to clock in at 1.9% this did not prove to be enough to shore up the Australian Dollar (AUD) on Thursday morning.
After a disappointing second quarter consumer price index the Australian Dollar has largely fallen out of favour with investors, with the Reserve Bank of Australia (RBA) looking set to remain on hold for longer.
With confidence in the domestic outlook still limited AUD exchange rates remain vulnerable to any fresh deterioration in global market sentiment.
Rising Producer Prices May Boost Australian Dollar (AUD) Exchange Rates
A similarly positive showing from tomorrow’s Australian producer price index figures may put some pressure on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate, however.
If signs across the board point towards increasing price pressures this could encourage renewed confidence in the Australian Dollar.
However, the GBP/AUD exchange rate may find a rallying point ahead of the weekend if the second quarter US gross domestic product strengthens in line with forecasts.
A fresh acceleration in US growth is likely to encourage the Federal Reserve to pursue a more aggressive pace of monetary tightening, increasing policy divergence with the RBA.
Demand for the commodity-correlated Australian Dollar may slump further in the face of a more bullish US Dollar (USD).
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Volatile on BoE Rate Hike Speculation
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to experience increased volatility as expectations mount ahead of the Bank of England’s (BoE) August rate decision.
After a recent string of underwhelming data the odds of an imminent interest rate hike have declined sharply, creating a greater sense of market uncertainty ahead of the policy announcement.
If UK lending data proves encouraging on Monday this may help to bolster expectations of a more hawkish BoE meeting.
As long as the central bank delivers the interest rate hike that investors have been hoping for the mood towards Pound Sterling (GBP) is likely to improve sharply.
A rate hike accompanied by some dovish forward guidance or a lack of policy action, meanwhile, would weigh heavily on the GBP/AUD exchange rate.
Simmering Global Trade Tensions Benefit GBP/AUD Exchange Rate
Any escalation in trade tensions between the US and China could also influence the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate over the coming days.
If the US-China spat continues to weigh on the global economy the appeal of the risk-sensitive Australian Dollar is likely to diminish further.
Worries over Brexit may put the Pound under renewed pressure, on the other hand, as the March 2019 deadline draws closer.
Unless markets see signs that the UK and EU are likely to progress towards a satisfactory agreement soon the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate could lose its positive momentum.