Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Boosted by Loosening Australian Labour Market

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Gains Ease as Brexit Optimism Cools

UPDATE: Demand for Pound Sterling (GBP) eased over the course of the day as market optimism over Brexit began to cool.

Even so, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained on a positive footing thanks to the relative weakness of the antipodean currency.

As investors are still confident that a no-deal Brexit scenario will be avoided the downside pressure on GBP exchange rates proved limited, only unwinding some of their recent bullish gains.

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Benefits from Underwhelming Australian Employment Data

A surprise decline in the Australian participation rate saw the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate extend its bullish run this morning.

Although this decline in participation saw the headline unemployment rate fall from 5.1% to 5.0% this still left the Australian Dollar (AUD) on a weaker footing.

With fewer Australians now active within the labour market confidence in the outlook of the wider economy diminished.

The continued decline in full time employment positons also weighed on the mood towards the Australian Dollar, further undermining the case for a hawkish Reserve Bank of Australia (RBA) policy outlook.

As worries over the global growth outlook encourage market risk aversion, AUD exchange rates continue to lack support.

Lower Odds of No-Deal Brexit Shore up Pound Sterling (GBP) Exchange Rates

Speculation over Brexit has helped to shore up the Pound, meanwhile, as the odds of a no-deal scenario have fallen.

Even though the parliamentary gridlock following the defeat of Theresa May’s Brexit proposal has created a persistent sense of uncertainty the GBP/AUD exchange rate has continued to recover ground.

Talk of a potential extension to the March deadline has seen a mixed reaction, however, as markets remain wary of the prospect of an even longer period of uncertainty.

With the chances of a second referendum also diminishing the Pound has struggled to hold onto its recent run of gains, with no resolution to the parliamentary impasse looking likely in the near future.

GBP/AUD Exchange Rate Looks for Support from Improved UK Retail Sales

The GBP/AUD exchange rate could find further support ahead of the weekend on the back of January’s CBI reported retail sales index.

Forecasts point towards a solid rebound in sales on the month, with the index strengthening from -13 to 2 at the start of 2019.

This would suggest consumers are largely shrugging off Brexit-based jitters and increasing spending once again, to the benefit of the wider economy.

However, if the details of the data indicate a continued reliance on debt among households this may limit any positive impact of the headline index.

If investors see any reason to price in a higher risk of a no-deal Brexit this could prompt a sharp slump for GBP exchange rates.

Lacklustre Business Confidence to Keep Australian Dollar (AUD) Exchange Rates under Pressure

With a general improvement in market risk appetite the Australian Dollar may struggle to return to a stronger footing in the days ahead.

Tuesday’s NAB business confidence index is not expected to offer any particular boost to AUD exchange rates, however.

If confidence remains muted or shows any decline on the month the Australian Dollar is likely to extend its losses, weighed down by worries over the underlying health of the domestic economy.

Further volatility is also forecast for the GBP/AUD exchange rate on the back of the fourth quarter Australian consumer price index data, especially if inflation shows signs of picking up.

Hannah Wilson

Contact Hannah Wilson