Pound Sterling to Australian Dollar Exchange Rate Forecast: Revived Trade Jitters Could Help GBP/AUD Recovery

Pound to Australian Dollar Exchange Rate Slumps to Monthly Low as RBA Takes Optimistic Tone

UPDATE: The Australian Dollar (AUD) was able to easily benefit from a weakened Pound (GBP) on Tuesday, pushing the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to its worst levels in over a month.

The Reserve Bank of Australia (RBA) took a cautiously optimistic tone on Australia’s economy during its August policy decision.

Some analysts had been concerned that Australia’s outlook would be notably negatively effected by US trade protectionism, so the RBA decision was perceived as more hawkish than expected.

This helped the Australian Dollar to continue this week’s recovery rally and push GBP/AUD into the interbank region of A$1.74.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Touches Two-Month-Low on ‘No Deal’ Brexit Fear

UPDATE: Continuing its slide on Monday morning, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate rebounded slightly after hitting its worst levels in two months.

The GBP/AUD fell very close to the interbank level of 1.75 on Monday, although Sterling managed to edge higher before falling as low as A$1.74.

Still, if ‘no-deal’ Brexit fears persist or worsen, or the Australian Dollar (AUD) finds some support from the Reserve Bank of Australia, GBP/AUD could continue to fall.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Tumbles despite Persistent Trade Jitters

The Australian Dollar (AUD) has seen mixed performance in recent weeks, but the Pound to Australian Dollar (GBP/AUD) exchange rate was driven lower last week by the latest Brexit uncertainties.

After opening last week at the interbank level of A$1.77, GBP/AUD briefly touched on a high of A$1.78 before tumbling and ended the week near the level of A$1.75.

This week so far, fresh Brexit jitters and some optimistic mining news saw GBP/AUD slip even lower, and the pair was trending at its lowest levels in almost two months at the time of writing.

Could the Australian Dollar’s climb continue? That largely depends on what tone the Reserve Bank of Australia (RBA) takes in its upcoming policy decision on Tuesday, while Pound (GBP) traders will be focusing on Brexit developments and UK growth data.

Pound (GBP) Exchange Rates Take a Hit Following ‘No Deal’ Brexit Comments

Last week saw the Bank of England (BoE) hike UK interest rates, but despite this the Pound (GBP) actually fell against most major currency rivals – including the Australian Dollar (AUD).

This was because despite the bank’s surprisingly unanimous decision, BoE Governor Mark Carney played up Brexit uncertainties in his follow-on speeches.

On Friday, Carney even noted that he believed the chances of the Brexit process ending with a worst-case scenario ‘no deal’ outcome had become ‘uncomfortably high’. This caused investors to sell the Pound towards the end of the week.

‘No deal’ Brexit fears continued to drive Sterling when markets opened on Monday, as investors reacted to weekend comments from UK Trade Secretary Liam Fox.

Fox stated that he believed the EU was driving the UK towards a ‘no deal’ Brexit, in fact he believed the chances of the UK leaving the EU without a deal in place were currently as high as 60-40.

Australian Dollar (AUD) Exchange Rates Sturdy on Rock Solid Mining News

The commodity-correlated Australian Dollar (AUD) has been supported by optimistic extractive industries news since the end of last week, despite ongoing concerns about the US-China trade spat and the possibility of a full blown trade war.

On Friday, Chinese iron ore futures hit their best levels since March despite said trade war nerves. As iron ore is Australia’s most lucrative commodity and China is Australia’s biggest trade partner, this made the Australian Dollar more appealing.

More signs of strength in Chinese markets has further supported the Australian Dollar and helped it rebound from its recent lows, although Brexit fears weighing on the Pound (GBP) also played a large part in dragging GBP/AUD lower.

Monday saw the publication of some positive Australian ecostats which bolstered Australian Dollar support a little further.

Australia’s TD-MI inflation gauge rose from 0% to 0.1% in July, while ANZ’s July job advertisements data rose from -1.7% to 1.5%.

Pound to Australian Dollar (GBP/AUD) Forecast: Reserve Bank of Australia (RBA) in Focus

While the Reserve Bank of Australia (RBA) is not expected to announce any changes to Australian monetary policy during its August policy decision on Tuesday, the tone the bank takes could be highly influential to Australian Dollar (AUD) movement this week.

The RBA is likely to maintain its cautious, largely neutral, tone regarding Australia’s economic outlook and monetary policy, but if the bank is surprising in regard to US trade protectionism it could drive AUD.

For example, if the bank signals that Australia’s economy is more resilient to the trade jitters than expected this could help the Australian Dollar recovery rally continue.

Worsening concern over the possibility of a full-blown trade war could leave the Australian Dollar unappealing though, which would help GBP/AUD to recover some of its recent losses.

Looking ahead, Australian housing data will be published on Wednesday, and RBA Governor Philip Lowe’s speech on the same day could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate ahead of Friday’s key UK growth reports.

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