GBP/AUD Remains Under Pressure as Spokesman Talks Down Brexit Deal Prospects
UPDATE: The Pound (GBP) has continued to sustain losses against the Australian Dollar (AUD) as the prospects of a UK/EU exit deal were downplayed by Theresa May’s official spokesman.
James Slack told reporters earlier that: ‘There is a difference between people talking optimistically about a deal and a deal being done,” Slack told reporters in London on Monday. “There can be no withdrawal deal without a precise future framework.’
The spokesman also declined to confirm that Brexit Secretary was travelling to Brussels to meet his EU counterpart Michel Barnier, with his vague answers frustrating markets who had been expecting some clarity on the issue.
Pound to Australian Dollar Down 0.8% and Gives up Some of Last Week’s Gains as PBC Cuts RRR Ratios
The Pound (GBP) has got off to a poor start against the Australian Dollar (AUD) this morning, losing around 0.8%%.
This comes after China announced that it was cutting the reserve requirements ration (RRR) for its domestic banks, in effect unleashing liquidity into the market and providing a boost for its flagging economy.
With China being Australia’s largest market for exports any economic stimulus has a knock-on effect there.
Australian Dollar Hammered by Pound Last Week on Broad Weakness and Brexit Optimism
Last week was a difficult one for the Australian Dollar (AUD) with the currency falling in every day of trade against the Pound (GBP) and ending up a full 5 cents lower by the end of the session.
The weakness was caused by a drop off in risk appetite across markets as well as the Reserve Bank of Australia (RBA) stating that they were not eyeing any exchange rate increase in the foreseeable future.
At the same time, reports emerged of a potential deal between the EU and the UK that could be agreed ‘in weeks’ and would resolve the thorny issue of how the Irish border with Northern Ireland would operate after Brexit.
This gave Sterling a considerable boost, with markets relieved to see the firm possibility of a deal coming into view after a long period of impasse.
… But this Week is Another Story as BCC Warns Brexit is Causing UK Business Woes
It is a different story this week as the Pound (GBP) sinks against the Australian Dollar (AUD) with a prominent UK business group warning that the uncertainty surrounding Brexit is causing firms to hold off from investing in the UK economy.
The British Chambers of Commerce (BCC) issued the warning with Director General Adam Marshall stating:
‘We are stuck in limbo while Brexit negotiations rumble on.’
Despite this gloomy note, however, optimism surrounding the UK’s divorce from the EU is set to get a boost this week as Brexit Secretary Dominic Raab heads to Brussels to meet with the EU’s chief negotiator Michel Barnier.
On Wednesday Barnier is slated to address EU commissioners and outline the details of the UK’s exit, with GBP traders likely to be focused closely on what he says.
GBP/AUD Exchange Rate Outlook: Focus on Brexit Progress and UK GDP Figures this Week
Further volatility is likely in store for GBP exchange rates over the course of the week as focus turns towards Wednesday’s raft of trade and growth data.
August’s monthly gross domestic product (GDP) figures could dent the GBP/AUD exchange rate, with economists currently predicting there will be a slowdown in growth from 0.3% to 0.1%.
Furthermore, with forecasts also currently pointing towards a widening of the UK trade deficit the Pound looks unlikely to find much support from the print, even if Brexit anxieties show signs of easing.
In terms of Australian data Thursday sees some consumer inflation figures being released, while on Friday Australian home loans data is published, with either result likely to put pressure on the GBP/AUD exchange rate.