Pound to Australian Dollar (GBP/AUD) Exchange Rate Dips as Brexit Tensions Ease Over Christmas

GBP/AUD Exchange Rate Dips despite Signs of Weakening Chinese Economy

The Pound Australian Dollar (GBP/AUD) exchange rate is down slightly today, and is trading in the region of AUD$1.7920.

Sterling has lost some ground against the Australian Dollar (AUD) despite last week’s indications that China’s economy may be slowing.

The Australian Dollar (AUD) has also remained under pressure amid concerns that the 90 day truce between the US and China may end prematurely in light of the recent controversy over China’s arrest of two Canadians.

These arrests followed Canada’s controversial arrest of Meng Wanzhou, the Chief Financial Officer for the Chinese tech giant, Huawei, earlier this month.

Pound (GBP) investors, meanwhile, have remained generally cautious, with Parliament to continue Brexit negotiations on 7th January, and Prime Minister Theresa May to face a crucial vote on her Brexit withdrawal agreement in the New Year.

Pound Australian Dollar (GBP/AUD) Exchange Rate Down as Brexit News Recedes

The absence of Brexit news has kept the Sterling steady, while the release of UK’s Q3 GDP figures on Friday (which showed an increase of 0.6% on the quarter) did lend the Pound a little support before the weekend.

Friday also saw the release of the UK’s public sector net borrowing figures for November, which showed that government borrowing had reached its lowest level for 16 years.

Friday also saw the release of the UK Gfk consumer confidence figures, which decreased to -14 on last month’s -13, continuing its decreasing trend.

The UK will not see any further data releases until Friday, with the Pound set to remain fairly steady as political tensions and market volatility stabilises over the festive season.

AUD/GBP Exchange Rate Gains as Chinese Data Disappoints

The risk-sensitive Australian Dollar was hit by the news that China’s economic growth had slowed to a decade-low of 6.5% in the third-quarter. Last week also saw Guangdong’s government fail to release significant PMI figures.

Shen Jianguang, a Chief Economist at JD Finance commented:

‘[China’s] mainland economy is under pressure, as we see consumer and factory data are very weak. Actual private sector and consumer demand is weakening. The absence of the economic data would only exacerbate suspicion [about the true condition of the economy].’

The ‘Aussie’ is sensitive to changes in the Chinese economy, with China being Australia’s biggest trading partner.

GBP/AUD Outlook: Brexit and Geopolitical Tensions to Remain in Spotlight

The GBP/AUD exchange rate is likely to be driven by political rather than economic forces in January, as Brexit debates are expected to flare with the return of Parliament on 7th January, and Theresa May once again rallying to gain support for her Brexit deal.

Meanwhile there are fears that AUD exchange rates could fall in the New Year, with Kyle Rodda of IG Markets commenting that fears are building over ‘the strength of the Australian economy, and greater volatility in global markets [is leading] to a diminishing risk appetite.’

Looking ahead to Friday of this week, the UK will see the important release of mortgage approval figures for November, with any signs of an increase benefiting Sterling.

These will be followed by the release of the UK’s consumer credit figures for November.

The ‘Aussie’, meanwhile, may find a little support any signs of bullishness from the release of the private sector credit figures for November.

Hannah Wilson

Contact Hannah Wilson