Pound Sterling to Australian Dollar Exchange Rate Avoids Losses as Brexit Speculation Remains Fuelled

Pound to Australian Dollar Exchange Rate Holds Ground Despite Optimistic Reserve Bank of Australia (RBA)

UPDATE: Investors were hesitant to support the Australian Dollar (AUD) on Tuesday, with markets uncertain amid the 2018 US midterm elections. As a result, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate more easily held its ground.

The Pound (GBP) was supported on Tuesday afternoon by news that UK Brexit Secretary Dominic Raab had left a key Cabinet meeting saying ‘thumbs up’.

GBP/AUD strength came despite news that the Reserve Bank of Australia (RBA) had been optimistic in its latest policy decision, upgrading its Australian growth forecasts.

Pound to Australian Dollar Exchange Rate Movement Limited as Investors Await Key Developments

UPDATE: Uncertainty around Brexit prevented the Pound to Australian Dollar (GBP/AUD) exchange rate from extending its rally above 0.25% on Monday afternoon.

Investors were hesitant to move too much on the Australian Dollar (AUD) ahead of Tuesday’s anticipated Reserve Bank of Australia (RBA) decision, even though the bank is not expected to make any changes to monetary policy.

Instead, investors will be focusing on any possible changes in tone it makes regarding Australian price pressures and the ongoing US-China trade tensions.

Pound to Australian Dollar Exchange Rate Continues Rally despite Brexit Uncertainties and UK PMI Data

Investors bought the Pound over the Australian Dollar (GBP/AUD) on Monday in reaction to a report claiming that the EU had offered concessions to UK negotiators, regarding the issue of Ireland’s border.

Despite denials of the report and some weaker UK data, GBP/AUD was able to hold onto some of its gains as investors sold the Australian Dollar (AUD) off from its recent highs

This morning, GBP/AUD has recovered around half of last week’s gains although it has been unable to hold the morning’s best levels due to Brexit news and UK data.

Meanwhile, the Australian Dollar’s own strength was limited by some renewed risk-aversion, despite last week’s higher risk-sentiment.

Pound (GBP) Exchange Rates Struggle to Capitalise on Brexit Speculation amid Lingering Concerns

When markets opened today, investors reacted to a report from the Sunday Times claiming that the UK government had got a concession from the EU.

The report claimed that negotiators were working towards a deal to keep the whole of the UK in a customs unions until a more detailed agreement had been made, as a solution to the issue of Ireland’s border.

Despite denials about the validity of the report from officials, as well as other reports claiming that major hurdles still remained in negotiations, this has been the primary cause of Pound (GBP) strength on Monday.

Investors largely brushed over concerns from analysts that such an agreement was unlikely, with Fabian Zuleeg from EU thinktank the European Policy Centre saying:

‘I don’t see the EU willing to accept a deal without the Northern Ireland-specific backstop.

What I have found concerning is that people are making very categorical statements that no British prime minister can sign a backstop on Northern Ireland which seems to go against what is agreed in December, and you hear it not from the government but also the opposition. That makes me think we are moving very quickly to a no deal.’

Investors also seemed to brush over a notably disappointing UK services PMI on Monday, as they continued to buy into the Pound.

Australian Dollar (AUD) Exchange Rates Knocked off Highs

Investors sold the Australian Dollar (AUD) off its best level in around five weeks when markets opened today, thanks to fresh global risk-aversion as well as some underwhelming Australian data.

Anticipation for the upcoming Reserve Bank of Australia (RBA) policy decision limited ‘Aussie’ weakness, although the currency’s appeal was still low.

Concerns that US-China trade war jitters are beginning to have a negative impact on China’s economy weighed on the Australian Dollar, as China is Australia’s biggest trade partner.

On top of this, Australia’s October TD-MI inflation gauge slowed from 0.3% to just 0.1% month-on-month.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Traders Anticipate Reserve Bank of Australia (RBA) Decision

Whether or not the Pound (GBP) continues its recovery rally depends on how upcoming Brexit developments go.

Investors and analysts are hoping there will be major progress on the issue of Ireland’s border in the coming weeks, so there is still time to hold an emergency UK-EU summit and finalise a deal before the end of the month.

For now, GBP investors are optimistic and the Pound is climbing. However, if more time goes by without any confirmation of progress investors may become more concerned.

GBP/AUD may also have a harder time climbing if upcoming Australian news impresses investors. Australian Dollar (AUD) investors are currently anticipating the Reserve Bank of Australia’s (RBA) November policy decision, due to be held on Tuesday.

If the bank is more cautious than expected, investors could bail out of the Australian Dollar.

On the other hand, the Pound to Australian Dollar (GBP/AUD) exchange rate could slump if the bank is more hawkish than investors expect.

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