Pound Sterling to Australian Dollar Exchange Rate Fails to Recover amid US-China Trade Hopes

Pound to Australian Dollar Exchange Rate has shed Most of Last Week’s Gains

UPDATE: Tuesday saw many investors buy the Pound (GBP) back from its lowest levels following Monday’s plummet, but the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate failed to fully recover.

Sterling failed to find much support on Tuesday’s news, despite a surprisingly strong UK job market report, as Brexit uncertainties persisted. The risk-averse Australian Dollar (AUD) largely held its Monday gains versus the Pound, thanks to speculation that US-China trade negotiations were still underway despite last week’s fresh US-China trade tensions.

Pound to Australian Dollar Exchange Rate On Track to Lose Around a Cent Today

UPDATE: Brexit uncertainties have deepened on Monday afternoon, as reports emerged suggesting that UK Prime Minister Theresa May was preparing to delay Tuesday’s anticipated UK Parliament vote on Brexit.

The Pound to Australian Dollar (GBP/AUD) exchange rate fell even further as markets became anxious at fresh Brexit uncertainties.

At the time of writing, GBP/AUD was trending around a cent lower than the pair’s weekend levels at a rate of AU$1.7511.

Pound to Australian Dollar Exchange Rate Slides as ‘Aussie’ Benefits from US Dollar Weakness

Despite the risk-off mood in markets amid worsening tensions between the US and China, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate slipped on Monday morning. Markets focused on Tuesday’s upcoming Brexit vote – and then they focused on the news that it might be delayed or even cancelled.

After briefly touching an interbank 11-month-low of 1.72 last week, GBP/AUD ultimately recovered strongly as investors sold risky trade-correlated currencies like the Australian Dollar.

GBP/AUD closed last week around four cents higher, but on Monday morning it quickly shed around half a cent again as markets overlooked risk-aversion and bought the Australian Dollar (AUD) due to weakness in its rivals.

The Pound (GBP) remains highly unappealing due to the political turmoil surrounding Brexit, with traders seizing every fresh headline that appears.

This made it easier for the Australian Dollar to climb. The relatively risky ‘Aussie’ is advancing as the US Dollar (USD) is sold in reaction to mixed US data and cautious signals from the Federal Reserve.

Pound (GBP) Exchange Rates Fail to Find Support in Disappointing UK Growth Stats

Investors have found Sterling highly unappealing over the past few weeks, as Brexit uncertainties have only seemed to mount despite the formal March Brexit date being less than four months away.

On top of these deepening Brexit uncertainties, the Pound’s (GBP) appeal was dampened on Monday by some disappointing UK growth results.

Britain’s October Gross Domestic Product (GDP) growth rate came in at 1.5% year-on-year, lower than the expected 1.6%. According to Marina Mensah-Afoakwah, Senior Economist at CEBR, Brexit uncertainty has played a big part in weakening UK growth:

‘Today’s data show that the UK economy has continued its slowdown into Autumn, as business and consumer confidence take a hit amidst Brexit uncertainty.’

Australian Dollar (AUD) Exchange Rates Benefit from Rival Weakness

While risk-sentiment has been weaker since last week due to fears that US-China trade tensions are worsening rather than lessening, the risk-correlated Australian Dollar (AUD) strengthened on Monday.

Rather than this being caused by any positive data, the Australian Dollar’s Monday gains were mainly caused by weakness in rivals – namely the Pound (GBP) and especially the US Dollar (USD).

Investors have been selling the US Dollar (USD) amid concerns that the Federal Reserve may not hike US interest rates much more before pausing its rate hike cycle after all.

The Fed’s recently cautious and dovish language has left investors selling the safe haven US Dollar, making the relatively risky Australian Dollar more appealing.

According to Kiwi Bank Chief Economist Jarrod Kerr:

‘The US Dollar is under the shadow of any resolution to the ongoing trade disputes, increasingly dovish Fed language, and slowing global growth – that set of factors has created a wall of worry offshore,’

The Australian Dollar also found some support in Australia’s October home loans results, which beat 0.0% forecasts and came in at 2.2%.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Losses Could Worsen this Week

The Pound to Australian Dollar (GBP/AUD) exchange rate could fall even further if Brexit uncertainties are not resolved soon.

The Australian Dollar (AUD) may continue to be influenced by strength in rivals like the US Dollar (USD).

However, some Australian business confidence data from November and Q3 house price index stats on Tuesday may influence the Pound to Australian Dollar (GBP/AUD) exchange rate too.

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