GBP/AUD Exchange Rate Falls Further on Concerns about Stalled Brexit Talks
UPDATE: The Pound Sterling Australian Dollar (GBP/AUD) exchange rate has continued its downward trajectory today, hitting a level of AU$1.78 on the interbank exchange rate.
This deterioration in value for the Pound has been caused by the latest Brexit news, with the EU’s Chief Negotiator Michel Barnier making lines in the sand for the ongoing negotiations.
The Pound previously rallied when Mr Barnier suggested a bespoke Brexit deal for the UK, but his latest comments have sent the Pound falling in value once again.
Dashing hopes for such an arrangement, Mr Barnier bluntly stated:
‘We have a coherent market for goods, services, capital and people – our own ecosystem that has grown over decades.
‘You cannot play with it by picking pieces.’
Disappointing UK Manufacturing PMI Adds to GBP/AUD Exchange Rate Losses
The Pound has opened this week by making losses against the Australian Dollar; the GBP/AUD exchange rate has dropped by -0.8% and hit an interbank exchange rate of AU$1.78.
This early loss for Pound Sterling comes after the release of the latest UK manufacturing PMI reading, which has shown a concerning slowdown.
August’s reading fell from 54 points to 52.8, well below the anticipated printing of 53.8 points.
Duncan Brock of the Chartered Institute of Procurement and Supply (CIPS) summed up the latest data, saying:
‘Fears for a stalling manufacturing sector took a step closer to becoming a reality this month with the most disappointing performance for two years.
‘The lifeline of strong export orders enjoyed since May 2016 dried up, as the attraction of a weaker Pound was not enough to sustain the momentum. The domestic market once again failed to make up any shortfall.’
The Pound has made additional losses today after recent critical comments about the Brexit process from the former foreign secretary Boris Johnson.
Johnson said the so-called Chequers plan: ‘In adopting the Chequers proposals, we have gone into battle with the white flag fluttering over our leading tank.’
Australian Dollar to Pound Sterling Exchange Rate Rebounds from Near 4-Month Low
The Australian Dollar (AUD) has firmed against Pound Sterling (GBP) and most other peers today.
Last week saw the Australian Dollar hit its lowest level against the Pound since May 2018, but today could mark the start of a recovery in the AUD/GBP pairing.
There hasn’t been any strongly supportive Australian data to enable this bounce back; July’s retail sales reading has shown a flat 0% printing.
GBP/AUD Forecast: Will UK PMI Stats Cause Pound Sterling Recovery?
This week, Pound/Australian Dollar exchange rate movement is likely to be caused by additional UK PMI data, as well as some Australian banking, GDP and trade news.
In terms of the UK announcements, the Pound could fall further if tomorrow’s construction PMI reveals a slowdown in August.
The situation could improve on Wednesday, however, should August’s UK services PMI show a forecast-matching rise.
The services sector contributes the most to UK economic growth, so a sharp rise might be enough to restore confidence in Pound Sterling and bring back some gains against the Australian Dollar.
Australian Dollar Forecast: Will AUD/GBP Exchange Rate Drop on GDP Data?
On the other side of the pairing, the next Australian data will be tomorrow’s Reserve Bank of Australia (RBA) interest rate decision – although this isn’t expected to see any change to the current rate of 1.5%.
The RBA policy meeting could still cause an AUD/GBP exchange rate rise, however, if there are hints of a potential interest rate hike in 2019.
The week’s other Australian news may be less supportive for the Australian Dollar – a Q2 GDP slowdown is expected to be reported on Wednesday and a shrinking trade surplus is anticipated for Thursday.