GBP/AUD Exchange Rate Recovers Ground Ahead of Vote on No-Deal Brexit
UPDATE: After MPs voted down Theresa May’s Brexit deal Pound Sterling (GBP) saw a solid rebound across the board, in spite of the increased sense of uncertainty this rejection brought.
Investors remain confident that MPs will also vote to rule out a no-deal Brexit tonight, reducing the odds of the UK crashing out of the EU in just over two weeks time.
This sense of optimism helped the GBP/AUD exchange rate to recover some of its lost ground, even in the absence of greater clarity over the UK’s future.
Prospect of Brexit Deal Rejection Weighs on GBP/AUD Exchange Rate
UPDATE: With both the DUP and Conservative backbenchers looking set to vote against Theresa May’s updated Brexit deal the mood towards Pound Sterling (GBP) continued to deteriorate this afternoon.
The prospect of more uncertainty over Brexit kept the GBP/AUD exchange rate under pressure over the course of the day, driving the pairing further away from its recent highs.
With the issue of Brexit looking unlikely to see any resolution in the near future the appeal of the Pound is unlikely to improve.
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Stumbles as Stronger UK Growth Fails to Outweigh Brexit Anxiety
As markets braced for the latest parliamentary vote on Theresa May’s proposed Brexit deal a sense of uncertainty kept the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate on the back foot, given the risk of MPs rejecting the deal once again.
The latest legal opinion from attorney general Geoffrey Cox encouraged further selling of Pound Sterling (GBP), meanwhile, as his advice appeared to undermine the case for the latest incarnation of the deal.
Better-than-expected UK gross domestic product data was not enough to reverse the Pound’s latest downtrend.
While growth bettered forecasts to rise 0.5% on the month in January, driven largely by resilient consumer spending, this failed to shore up GBP exchange rates this morning.
Even as the UK economy appeared to shrug off Brexit-based uncertainty at the start of the year investors maintained a bearish outlook, with political developments significantly overshadowing domestic data.
Australian Dollar (AUD) Upside Limited as Business Confidence Declines
As February’s NAB business confidence index dipped this left the Australian Dollar (AUD) on a weaker footing against its rivals, though.
Investors were not impressed to find that business sentiment had deteriorated further last month, adding to existing worries over the strength of the economic outlook.
With the Reserve Bank of Australia (RBA) looking set to leave interest rates on hold for some time to come, or even potentially cut rates, the appeal of the Australian Dollar proved largely limited.
This was not enough to prevent the GBP/AUD exchange rate slumping sharply this morning, however, as Brexit worries eclipsed the influence of economic data.
Pound Sterling (GBP) Remains Vulnerable to Brexit Vote Outcome
Demand for the Pound may continue to weaken overnight if Theresa May faces a fresh defeat at the hands of MPs.
A lack of support for the latest proposed Brexit deal so close to the Article 50 deadline may leave GBP exchange rates in a state of decline.
Although Parliament could still vote for a potential extension of the deadline this prospect is unlikely to be enough to support the GBP/AUD exchange rate in the short term.
On the other hand, if May persuades enough MPs to support her deal this could offer the Pound a solid rallying point tonight as investors look for a sense of clarity.
Weaker Australian Inflation to Offer GBP/AUD Exchange Rate Boost
Even so, the GBP/AUD exchange rate could find some support on the back of Thursday’s Australian consumer inflation expectation report.
Any indication that inflationary pressure within the Australian economy is easing would leave the Australian Dollar exposed to a fresh bout of selling pressure.
With signs of softening inflation likely to encourage greater RBA dovishness a weaker showing here may drive AUD exchange rates lower across the board.
A continued lack of progress towards a US-China trade agreement could also put pressure on the Australian Dollar, meanwhile, with the trade dispute already showing signs of dragging on global growth.