Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Tumbles to Weekly Low on Strong Chinese Data

Pound to Australian Dollar Exchange Rate Struggles to Hold Ground Amid Lack of Fresh Brexit Developments

UPDATE: Investors weren’t as willing to keep supporting the Pound Sterling aganst the Australian Dollar (GBP/AUD) on Thursday, amid a lack of fresh supportive factors for the Pound (GBP).

Instead, strong Chinese data and higher demand for risk-linked currencies helped the Australian Dollar (AUD) to recover some of its recent losses, pushing GBP/AUD to its lowest levels since last week.

As China is Australia’s biggest trading partner, news that Chinese exports surged 15.6% year-on-year in October made the Australian Dollar more appealing.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Continues to Slide as Investors Digest US Midterms Results

UPDATE: A combination of a weaker US Dollar (USD) and higher market demand for risk has left the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate 0.3% lower on Wednesday.

Investors bought the Australian Dollar (AUD) as risky trade-correlated currencies benefitted from market relief that the US Mid-Term Elections were over – with minimal surprises.

The Australian Dollar also benefitted from a US Dollar (USD) selloff. Investors are selling the US currency due to concerns that US President Donald Trump may have trouble passing new fiscal policy through Congress.

This made it easier for the ‘Aussie’ to push the Pound to Australian Dollar exchange rate lower over the day.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Gains Limited as Investors Anticipate Brexit News

Brexit speculation has kept the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trending with an upside bias this week, but the pair’s gains were limited on Wednesday by market reaction to the results of US midterm elections.

Last week saw GBP/AUD as one of the few major Pound (GBP) exchange rates to fall, losing around half a cent.

This week so far, GBP/AUD has recovered most of those losses, but has failed to extend its gains due to resilience in the Australian Dollar (AUD).

Investors have been buying the Pound (GBP) amid speculation that the UK and EU could finally be closing in on a Brexit deal. However, uncertainties about domestic support for such a deal as well as a lack of clear confirmation has limited Sterling appeal.

Meanwhile, despite this week’s mixed data the Australian Dollar has climbed. Investors are selling the US Dollar (USD) in response to the latest US political news, making the Australian Dollar more appealing.

Pound (GBP) Exchange Rates Avoid Losses amid Brexit Hopes

Despite a lack of major UK news or Brexit developments this week so far, the Pound (GBP) has been able to avoid losses this week. Sterling is trending with an upside bias due to speculation that a UK-EU Brexit deal is getting closer to reality.

Investors supported the Pound at the beginning of the week in reaction to a report in the Sunday Times claiming that the EU was prepared to offer a UK-wide customs deal in order to resolve the issue of Ireland’s border.

While this report was denied by officials, and analysts remained concerned about the obstacles a deal could face from UK MPs, hopes that a deal is finally in sight are keeping Sterling afloat.

Sterling found further support yesterday, following news that UK Brexit Minister Dominic Raab reportedly said ‘thumbs up’ after leaving a key cabinet meeting on Brexit.

Wednesday’s UK data had little notable influence on Sterling. Halifax’s UK house price index from October beat expectations, but the Pound was still unable to hold its best levels against a strengthening ‘Aussie’.

Australian Dollar (AUD) Exchange Rates Benefit from US Election Results

As was generally expected, the US 2018 midterm elections led to the Democratic Party taking the US House of Representatives.

The solid gains for the Democrats meant that US President Donald Trump will have more obstacles to implementing his fiscal policy plans.

Amid the market uncertainty at the upcoming changes to US Congress, investors sold the US Dollar (USD) when the results came in.

Weakness in the US Dollar (USD) left investors more eager to buy currencies that are usually negatively correlated to US Dollar strength, including the relatively risky Australian Dollar (AUD).

This was the primary cause of Australian Dollar strength on Wednesday, as Australia’s October construction PMI fell short of expectations and contracted to just 46.4.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Traders Await Further Political Developments

Amid a lack of notable data until Friday, the Pound to Australian Dollar (GBP/AUD) exchange rate’s movement is likely to be driven largely by political developments and sentiment over the next day.

Any potential Brexit developments are likely to be the primary focus for Pound (GBP) investors.

Brexit news will be increasingly in focus for the next few weeks, as investors hope for UK and EU negotiators to agree to a Brexit deal before the end of the month.

Meanwhile, further developments in US election news have the potential to drive the Australian Dollar (AUD), but as markets cool focus may shift back to US-China trade relations.

Unless there are political developments, Australian Dollar investors will be anticipating Friday’s Australian home loans data from September. The Reserve Bank of Australia’s (RBA) latest statement on monetary policy will also come in on Friday.

Lastly, while Brexit news is the focus, UK Gross Domestic Product (GDP) data on Friday also has the potential to drive Pound to Australian Dollar (GBP/AUD) exchange rate movement over the coming sessions.

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