Pound Sterling to Australian Dollar Exchange Rate Forecast: Central Bank News Could Dampen GBP/AUD Advance
Update: Pound to Australian Dollar Exchange Rate Edges Higher as Sterling Benefits from Trade Uncertainties
Despite a lack of fresh support for the Pound (GBP) on Monday, the Pound to Australian Dollar (GBP/AUD) exchange rate edged higher during the European session.
Investors bought the Brexit-embattled Pound back slightly from its cheapest levels. Due to uncertainties about upcoming US-China trade talks, it was able to easily gain against the Australian Dollar (AUD).
Tuesday will likely see the Australian Dollar react to the latest Reserve Bank of Australia (RBA) news, and if the RBA is more optimistic about Australia’s economy than expected GBP/AUD could weaken again.
Return of Risk Appetite Leaves Pound to Australian Dollar Exchange Rate Lower
With geopolitical jitters in focus last week, both the Pound (GBP) and Australian Dollar (AUD) struggled to exert themselves.
However, the Pound ultimately closed the week 2 cents lower against the Australian Dollar as no-deal Brexit worries pressured the Pound and hopes for US-China trade negotiations bolstered risk appetite.
Pound (GBP) Exchange Rates Limp as Brexit Takes Focus Again
Uncertainty surrounding the Brexit process drove the Pound last week and is likely to remain the prime catalyst for GBP volatility in the days ahead.
Sterling (GBP) was unable to benefit from last week’s reduced UK unemployment rate, or better-than-forecast inflation and retail sales data as investors remained anxious that Britain’s economic outlook will continue to be overshadowed by Brexit jitters.
With consumer and business activity expected to keep weakening until we have more clarity on the Brexit, the pressure on Sterling is only set to increase.
The Pound has lost around 12% of its value since April as March 2019’s formal Brexit date draws closer.
Australian Dollar (AUD) Exchange Rate Holds Ground on Hopes for US-China Trade Talks
Towards the end of last week, the Australian Dollar (AUD) was boosted by news that Chinese officials had been invited to the US for discussions regarding US-China trade tensions.
The news improved demand for risky trade-correlated currencies like the Australian Dollar, especially as Australia has strong trade links to both the US and China.
However, the Australian Dollar’s recovery against the Pound was limited.
While the Australian Dollar held its ground on Monday it was unable to keep climbing due to concerns that these upcoming US-China talks may not be hugely influential.
According to Yukio Ishizuki, Senior Currency Strategist at Daiwa Securities:
‘The US-China negotiations…will not be between high level officials and are therefore unlikely to produce immediate results. However, the markets will be hoping that the talks pave the way for negotiations at a higher level,’
Pound to Australian Dollar (GBP/AUD) Forecast: Reserve Bank of Australia and Geopolitical Developments in Focus
As this week’s economic calendar will be a little quieter, developments in geopolitics and Central Bank news are more likely to drive the Pound to Australian Dollar (GBP/AUD) exchange rate.
The Reserve Bank of Australia (RBA) will take focus during Tuesday’s Asian session, as RBA Governor Philip Lowe will be delivering a speech and the RBA will be publishing its latest meeting minutes report.
If the bank indicates that it’s becoming less anxious about the possibility of a US-China trade war, this could make the Australian Dollar (AUD) more appealing and push GBP/AUD lower in the coming days.
Of course, potential developments in US-China trade talks will be influential too. If they’re perceived as going well, higher-risk trade-correlated currencies like the ‘Aussie’ are likely to strengthen.
Tuesday’s UK borrowing and factory data could have a modest impact on the Pound (GBP), but Brexit news is likely to remain in focus.
Any potential developments in the Brexit process are most likely to influence the Pound this week and could be highly influential for the Pound to Australian Dollar (GBP/AUD) exchange rate.