GBP/AUD Exchange Rate Bolstered by Dovish RBNZ
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate rallied this morning, following warnings from the Reserve Bank of New Zealand (RBNZ) warning of a potential rate cut.
At the time of writing the GBP/AUD exchange rate is up around 0.5% this morning, helping the pairing to recoup a healthy portion of its losses from earlier in the week.
Australian Dollar (AUD) Slides as Dovish RBNZ Signals Possible Rate Cut
The Australian Dollar (AUD) is trading lower against the Pound (GBP) and the majority of its other peers this morning, after the RBNZ shocked currency markets by warning its next move could be a rate cut.
This prompted a dramatic drop in the New Zealand Dollar (NZD) earlier this morning, with AUD falling in sympathy for fears that the Reserve Bank of Australia (RBA) may follow suit.
The RBNZ’s announcement echoes other central banks in warning that the global economic outlook is deteriorating.
Speaking after its latest policy decision, RBNZ Governor Adrian Orr said:
‘The risk of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending.’
‘Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next OCR move is down.’
Pound (GBP) Steady ahead of Brexit Votes
At the same time, while the Pound (GBP) is up against the Australian Dollar (AUD) this morning it is struggling in wider trade as MPs prepare to vote on a range of various Brexit options.
After taking control of Commons business earlier in the week Parliament is set to hold a series of indicative votes later this evening in an attempt to break the current Brexit deadlock.
These votes will see UK lawmakers vote on a range of potential solutions to Brexit, including remaining in the EU customs union, holding a second referendum and even cancelling Brexit altogether.
Unsurprisingly economists are expecting these votes to drive further volatility in the Pound over the coming days, prompting GBP investors to remain cautious this morning.
GBP/AUD Exchange Rate Forecast: Could this Evening’s Brexit Votes Help to Turbo Charge Sterling?
Looking ahead, Brexit will undoubtedly remain the main catalyst of movement in the Pound Australian Dollar (GBP/AUD) exchange rate throughout the second half of this week.
This may potentially light a fire under Sterling if there appears to be strong support in this evening’s vote for a second referendum or even a revoking of Article 50.
However, any upside in the Pound may be capped after Theresa May warned that she will not necessarily respect the outcome of the votes, given that they are non-binding.
Meanwhile, US-China trade talks will get back underway on Thursday, likely drawing the attention of AUD investors and potentially offering some support to the Australian Dollar if there appears to be positive progress towards a deal.