Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Struggles to Strengthen in Spite of G20 Tensions

Australian Dollar (AUD) Exchange Rates Soften Amid Risk Aversion Ahead of G20 Summit

UPDATE: As markets continued to brace for tomorrow’s meeting between the US and Chinese leaders at the G20 summit the appeal of the Australian Dollar (AUD) remained limited.

AUD exchange rates also came under pressure on the back of November’s Chinese manufacturing PMI, which showed a surprise stagnation on the month.

Even with market risk appetite limited, however, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate struggled to gain much ground over the course of the day.

Sliding UK Consumer Confidence Dents Pound Sterling (GBP) Exchange Rates

UPDATE: Pound Sterling (GBP) remained under pressure this afternoon after an early release of the UK GfK consumer confidence index showed a sharp slump in sentiment.

With consumer confidence at its lowest level in eleven months this does not bode well for the outlook of the retail sector, especially as Brexit-based uncertainty remains elevated.

This disappointing showing kept the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate on the back foot, even as the US ramped up its rhetoric ahead of Saturday’s meeting with China.

BoE Brexit Analysis Weighs Heavily on Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate

Confidence in Pound Sterling (GBP) deteriorated this morning as investors continued to process the Bank of England’s (BoE) latest Brexit analysis.

GBP exchange rates came under renewed pressure as BoE Governor Mark Carney warned that many businesses were not prepared for the eventuality of a no-deal Brexit.

With support for Theresa May’s Brexit proposal still appearing rather limited this gave investors fresh incentive to sell the Pound, concerned by the outlook of the UK economy.

A weaker-than-expected uptick in October’s net consumer credit figure put additional pressure on the Pound, meanwhile.

As the BoE looks set to leave interest rates on hold for some time yet the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was left on a downtrend.

Australian Dollar (AUD) Exchange Rates Shrug Off Private Capital Expenditure Contraction

Another quarterly contraction in Australian private capital expenditure was not enough to weigh down the Australian Dollar (AUD) today.

Although weaker levels of capital expenditure suggest that businesses are taking a less positive view of the domestic outlook AUD exchange rates shrugged off the data.

Markets remain hopeful that the Reserve Bank of Australia (RBA) will maintain an optimistic outlook in the months ahead, even though the prospect of any monetary tightening remains distant.

Speculation of an imminent breakthrough in trade relations between the US and China has also helped to keep the Australian Dollar on a stronger footing this week.

While it remains to be seen whether the US and China can make any progress over trade on the side-lines of the G20 meeting AUD exchange rates benefitted from a sense of increased market optimism.

GBP Exchange Rates Vulnerable to UK Consumer Confidence Decline

November’s UK GfK consumer confidence index could place further pressure on the GBP/AUD exchange rate on Friday.

Signs point towards another dip in sentiment on the month, with the index forecast to ease from -10 to -11 in the face of persistent Brexit-based uncertainty.

Another weak month of confidence would not encourage any particular demand for the Pound, as sentiment does not look likely to recover in the near future.

An upside surprise could offer GBP exchange rates some degree of support, however, even though the confidence index is unlikely to return to positive territory any time soon.

Until the odds of a no-deal Brexit and further UK political disruption diminish significantly the potential for Pound gains appears muted.

Steady Private Sector Credit to Encourage Australian Dollar (AUD) Support

A steady showing from October’s Australian private sector credit figures could offer fresh support to AUD exchange rates ahead of the weekend.

As long as the Australian economy shows signs of resilience the mood towards the Australian Dollar should remain largely positive.

Continued growth in credit suggests that lenders are taking a more optimistic outlook, encouraging greater confidence in the underlying health of the Australian economy.

With investors bracing for Saturday’s US-China meeting, though, the GBP/AUD exchange rate could still recover some ground ahead of the weekend.

Any signs that the Trump administration is likely to impose additional tariffs on Chinese imports could see the Australian Dollar fall out of favour, given its sensitivity to developments within the Chinese economy.

Hannah Wilson

Contact Hannah Wilson