Pound Losses Seen Against Australian Dollar (GBP/AUD) as Brexit Woes Resurface
The Pound (GBP) was trading lower against the Australian Dollar (AUD) yesterday on resurgent worries that the UK was heading towards a no-deal scenario when it leaves the EU next March.
Currency traders were given a rude reminder of this possibility late on Friday when Transport Minister Jo Johnson quit his post, saying that UK Prime Minister Theresa May’s Brexit plans were unconscionable and were universally disliked across the political spectrum.
As a result, the Pound was off against the majority of currencies on Monday, falling around 0.4% against AUD.
Overnight, Sterling staged a small recovery against the Australian Dollar on reports that Brexit negotiations were back on track, but this was soon cancelled out by a rise in risk sentiment that saw currency traders pile back into risk-sensitive currencies such as the ‘Aussie’ Dollar.
This morning the GBP/AUD exchange rate is trading tightly and remains almost unchanged from its opening rate.
Australian Dollar to Pound (AUD/GBP) Exchange Rate Brushes off Weak Construction Sector Data
The ongoing weakening of the Australian construction sector was largely ignored by markets and failed to impact AUD for long last week.
Instead, traders chose to focus on the Reserve Bank of Australia’s (RBA) revised growth forecasts, which showed a slightly better outlook and prompted investors to back the Australian Dollar.
Furthermore, AUD exchange rates benefitted from mounting concerns ahead of the US midterm elections, and found further support when the results delivered a political gridlock.
Solid Chinese data also supported the Australian Dollar, giving it the upper hand over the Pound for most of the week in spite of key iron ore imports falling.
GBP/AUD Outlook: Underwhelming Employment Data Could Dent Australian Dollar
The Australian Dollar could return to a downtrend this week if Thursday’s labour market data fails to impress.
A fresh increase in the unemployment rate could furthermore see AUD exchange rates heading lower as confidence in the domestic outlook falters.
Even so, the prospect of an RBA interest rate hike remains distant thanks to the continued contraction of home loans and investment lending data.
However, if November’s consumer inflation expectations survey points towards rising price pressures this could offer the Australian Dollar a boost.
As long as the week’s data offers the RBA cause for continued confidence, the GBP/AUD exchange rate is likely to face continued downside pressure.