GBP/AUD Exchange Rate Dips Following Thursday’s Surge
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is easing this morning, after the pairing struck a three-month high overnight on the back of the latest developments in Brexit.
At the time of writing the GBP/AUD exchange rate has slipped 0.5% so far this morning, with the pairing falling back from Thursday night’s best levels.
Pound (GBP) Exchange Rate Trims Gains Following Strong Surge this Week
While the Pound Sterling Australian Dollar (GBP/AUD) exchange rate is currently trending lower this morning, the pairing is still set to close the week notably higher on the back of a slew of headlines that point to slashing the chances of a no-deal Brexit.
This culminated in a particularly strong surge in the Pound on Thursday evening as The Sun newspaper published a report suggesting that Northern Ireland’s Democratic Unionist Party (DUP) had privately offered conditional backing for Theresa May’s Brexit ‘Plan B’.
— Reuters Top News (@Reuters) January 25, 2019
GBP investors cheered the reports amidst hopes that it will increase the chances of the PM’s new deal passing when it is debated by Parliament next week, thus eliminating the chance of the UK crashing out of the EU without a deal on 29 March.
However Sterling proved to be a victim of its own success on Friday morning as the UK currency began to relinquish its gains amidst a bout of profit taking after outperforming its peers on FX markets this week.
Australian Dollar (AUD) Undermined by RBA Rate Cut Speculation
At the same time the Australian Dollar (AUD) finds its gains against the Pound (GBP) capped this morning amidst growing speculation that the Reserve Bank of Australia (RBA) will cut interest rates in 2019.
Analysts are increasingly wary that the RBA may be pressured into cutting rates this year after the National Australia Bank announced it would follow other big banks in raising variable mortgage rates for its customers independent of the RBA.
Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank states:
‘We expect Australian interest rate futures to continue pricing the risk of RBA rate cuts and this will remain a major headwind for AUD.
‘The probability of a 25 basis point RBA rate cut by year end has increased to 57% from 51% on Monday.’
GBP/AUD Exchange Rate Forecast: Brexit Set to Remain Main Driving Force Behind Sterling?
Looking ahead to next week’s session, Brexit looks set to be the main catalyst for movement in the Pound Australian Dollar (GBP/AUD) exchange rate, with Tuesday’s debate on Theresa May’s ‘Plan B’ likely to be a key flashpoint for the pairing.
This could see Sterling look to extend its recent gains if MPs back the new deal or if an amendment to block a no-deal Brexit garners enough support.
Meanwhile AUD investors are likely to be focused on next week’s CPI figures, with the ‘Aussie’ poised to fall if inflation slides in the fourth quarter as forecast, as it potentially puts more pressure on the RBA to cut rates in 2019.