Pound to Australian Dollar Exchange Rate Slides as ‘No-Deal Brexit’ Fears Persist
UPDATE: The UK Treasury’s Autumn Budget ultimately gave Pound to Australian Dollar (GBP/AUD) exchange rate investors little to be excited about, and Brexit fears merely persisted.
UK Chancellor Philip Hammond acknowledged that in the event of a ‘no-deal Brexit’, the Budget would need to be redone.
This merely added to the lack of certainty in markets about what kind of Brexit the UK and EU would end up with and kept pressure on the Pound (GBP).
The Australian Dollar (AUD) was able to more easily climb versus the Pound today thanks to some stronger-than-forecast Australian building permits data.
Pound to Australian Dollar Exchange Rate Limp as Investors Await Notable UK News
UPDATE: As the UK Treasury presented its 2018 Autumn Budget Statement on Monday afternoon, the Pound to Australian Dollar exchange rate’s strength was largely unchanged.
Investors hesitated to move much on the Pound (GBP) amid a lack of Brexit developments over the past week.
The Australian Dollar (AUD), on the other hand, was unable to capitalise on Pound weakness due to low market demand for trade-correlated currencies.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Lacks Drive as Brexit Fears Remain in Focus
With still no deal in sight in UK-EU negotiations, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remain weakened by broad-based Brexit fears as markets open for the week.
Last week saw GBP/AUD drop over two cents as the pair tumbled from the inter-bank level of AU$1.83 to AU$1.80 throughout the week. GBP/AUD has been trending close to its worst levels since the beginning of October.
Fears that the UK and EU would not be able to reach an agreement on major Brexit issues such as Ireland’s border, as well as the possibility that MPs could block any potential deal that is formed, hit the headlines last week.
This was the primary cause of Pound to Australian Dollar exchange rate losses, as the Australian Dollar’s (AUD) strength was also limited by an upsurge in risk-aversion.
Investors had little reason to buy into Sterling (GBP) this morning, instead opting to await the UK Treasury’s Autumn Budget later today.
Pound (GBP) Exchange Rates Struggle to Recover amid Broad Brexit Jitters
Despite last week’s news that Prime Minister Theresa May has avoided a fresh leadership challenge for now, and claims that Brexit negotiations were ‘95% completed’, certain sticking points have remained in focus.
Anticipation of today’s Autumn Budget did little to change investor appetite for the Pound, as fears that Brexit talks could fall through and lead to a ‘no-deal Brexit’ continued to dominate Sterling movement.
Today, the Chancellor is expected to hint that higher government spending is on the cards. However, this has failed to give Sterling investors much to get excited about amid Brexit uncertainties.
According to Jane Foley, head of currency strategy at Rabobank:
‘It will get worse for the Pound unless there is some positive news on the likelihood of a Brexit deal that will be passed by parliament,
The budget is unlikely to have a major impact given this backdrop.’
Australian Dollar (AUD) Exchange Rate Unable to Push Higher amid Weak Chinese Data
This morning’s Australian new home sales data was decent, but it was not enough to help the Australian Dollar (AUD) push GBP/AUD much lower as Chinese data disappointed investors.
Weekend figures revealed that Chinese industrial profits slowed for the fifth consecutive month, in the most recent sign that Chinese demand is slowing. As China is Australia’s biggest trade partner, this weighed on the Australian Dollar.
On top of this, global equity markets saw their worst month since the 2008 financial crisis.
This has further weighed on risk-sentiment, leaving investors selling relatively risky currencies like the Australian Dollar in favour of safe haven currencies like the US Dollar (USD).
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook: Investors Await Australian Inflation Stats
Unless there are some notable Brexit developments soon, the Pound to Australian Dollar (GBP/AUD) exchange rate is more likely to be driven by risk-sentiment and Australian data over the coming sessions.
Monday’s UK Autumn Budget is unlikely to be hugely influential for the Pound (GBP), but for now Sterling investors are anticipating developments from Brexit negotiations, while AUD investors are focusing on data.
Tuesday’s Asian session will see the publication of Australia’s September building permits results, however the week’s most influential data will be Wednesday’s Q3 Consumer Price Index (CPI) inflation rate.
Towards the end of the week, Australia’s trade balance data and the Bank of England’s November policy decision (no changes are expected) could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate.