Over the course of last week the GBP/AUD exchange rate fluctuated by around four cents, with the pairing ultimately closing the week lower.
While the Pound has recovered from its worst levels, a lack of certainty over how the Brexit process will proceed and concerns about the stability of the UK government have left the currency unappealing.
GBP/AUD lost around -0.3% as markets opened on Monday amid speculation that Prime Minister Theresa May could be pressured into resigning her post.
However, the Australian Dollar’s potential for gains was capped by recent data from Asia and concerns about slowing global growth.
Speculation about the content of this week’s Reserve Bank of Australia (RBA) speeches is also keeping AUD under pressure.
Last Week: Brexit Developments Cause Volatility
Risk-sentiment influenced the Australian Dollar for much of last week, but the Pound to Australian Dollar exchange rate’s biggest movements were in reaction to the latest shocks in the Brexit process.
In the middle of the week, the EU indicated that if Parliament did not pass the government’s Brexit deal by the 29th of March it would lead to a no-deal Brexit. Sterling plummeted before staging a recovery later in the week as the EU announced it would allow a Brexit delay to at least the 12th of April.
GBP/AUD’s uptrend was stymied however as Australian jobs data exceeded expectations.
While investors are still betting that the Reserve Bank of Australia (RBA) could cut Australian interest rates at some point this year, the latest ‘Aussie’ employment figures may reduce some of the pressure on the central bank to take action.
Three Things to Watch Out For This Week
- Brexit, Brexit, Brexit
The UK government intends to hold a third meaningful vote on its Brexit plan this week. However, if it fails or if Prime Minister Theresa May is pressured to step down, additional uncertainty and no-deal Brexit fears could send Sterling spiralling.
- US-China Trade Negotiations, RBA Speech
The US and China are set to resume key trade negotiations this week, and analysts say the talks could be nearing their climax. These negotiations may influence risk-sentiment and the Australian Dollar. The Australian Dollar may also fluctuate in response to a speech by RBA Assistant Governor Luci Kent. If Kent’s speech supports the case for lower interest rates, the Australian Dollar could dip.
- Friday’s Australian and UK Data
The majority of the week’s most notable data is scheduled for release on Friday, including Australia’s February private sector credit and Britain’s final Q4 growth figures. Depending on how Brexit developments pan out, the GBP/AUD exchange rate may experience a flurry of movement before the weekend off the back of these publications.
GBP/AUD Outlook
Amid a lack of notable UK data for most of the week, the Pound will be driven by Brexit while the Australian Dollar is likely to be influenced by shifts in global risk-sentiment. If the odds of a no-deal Brexit rise, GBP/AUD could slide.