GBP/AUD Floundering as Brexit and Global Trade Fears Continue to Mount

Pound to Australian Dollar (GBP/AUD)Exchange Rate Edges Away from Worst despite Brexit Fears

UPDATE: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was holding above the week’s lows this morning, despite continued weakness in the Pound (GBP).

Investors are becoming increasingly anxious about rising US-China trade tensions, as well as rising expectations that the Reserve Bank of Australia (RBA) will cut interest rates soon.

This is making it easier for the Pound (GBP) to avoid its worst levels, but news that cross-party Brexit talks have fallen through has kept up pressure on the Pound.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Tumbles as Brexit Fears Continue to Drag on Sterling

UPDATE: Last night’s key Australian job market report was mixed, but generally made investors more concerned that the Reserve Bank of Australia (RBA) would likely cut Australian interest rates soon.

Australia’s unemployment rate rose due to rising participation, but investors were still concerned that it rose more than expected to 5.2%.

Despite this, the Pound to Australian Dollar (GBP/AUD) exchange rate fell to its worst levels all week today as Brexit fears continued to drive the Pound (GBP) even lower.

Pound to Australian Dollar (GBP/AUD) Exchange Rate near Weekly Lows on Brexit Fears

Despite continued weakness in Australian data and rising expectations that the Reserve Bank of Australia (RBA) could cut interest rates in the coming months, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has continued to fall since yesterday.

Following last week’s tumble of almost two cents, GBP/AUD opened this week near the inter-bank level of AU$1.85 and has seen mixed movement since then.

GBP/AUD spent the first half of the week climbing as the Pound (GBP) benefitted from broad Australian Dollar (AUD) weakness, but since Wednesday afternoon the pair has tumbled.

Overnight, GBP/AUD slumped and briefly touched its worst levels in over a week. While GBP/AUD attempted to rebound from that low, it is continuing to trend relatively closely to those lows at the time of writing.

This is despite the Australian Dollar being weakened by a combination of US-China trade tensions, Australian data, and RBA interest rate cut expectations.

Pound (GBP) Exchange Rates Tumble as Brexit Fears Weigh Heavily

Concerns that the Brexit process is still nowhere near finding a solution and that uncertainties could dominate Britain’s economic outlook for months to come have returned to focus for Pound (GBP) investors this week.

As hopes of a cross-party Brexit unravel, they have been replaced by concerns that UK Prime Minister Theresa May could soon be ousted and replaced by someone who supports a no-deal Brexit.

Those fears have only worsened since the government announced that its thrice-defeated Brexit bill will return to Parliament for a fourth vote in early June.

Hard-Brexit supporting Conservative Party backbenchers, as well as the opposition Labour Party, have indicated they will vote against the bill.

Amid fears that the UK could see a change in leadership in July without any major Brexit progress being made, the Pound has been broadly unappealing this week.

Australian Dollar (AUD) Exchange Rate Gains Limited by Reserve Bank of Australia Interest Rate Cut Bets

The Australian Dollar (AUD) has also had a bearish week so far, but despite the large number of downside factors weighing on the antipodean currency it has been able to sustain some gains against an even weaker Pound.

Australian Dollar investors had already been anxious that the RBA could loosen monetary policy, and this week’s latest job stats have only caused interest rate cut expectations to rise.

Wage price index data on Wednesday fell slightly short of forecasts, and this morning’s Australian job market stats from April were mixed as well.

While there was a greater number of new jobs created than expected, and the participation rate rose higher, investors were anxious that the key unemployment rate had worsened to 5.2%.

Furthermore, the previous unemployment rate was revised higher, from 5.0% to 5.1%, and this put additional pressure on AUD.

On top of rising rate cut bets, the Australian Dollar has been unappealing due to recent weak Chinese data and continuously worsening trade tensions between the US and China.

Overnight, the US blacklisted Chinese tech giant Huawei and a number of its affiliates, in another blow to relations between the world’s two biggest national economies.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Traders Await Political Developments

The Pound (GBP) is unlikely to experience much fresh support in the coming days, but the GBP/AUD exchange rate could still end the week higher if US-China trade developments make the Australian Dollar (AUD) even weaker.

The Australian Dollar is likely to remain unappealing overall, and investors will be especially hesitant to make any notable shifts in movement on it as the weekend’s Australian general election approaches.

If the election results surprise or cause fresh uncertainty, the Australian Dollar could be in for further weakness.

The Pound, meanwhile, is likely to be driven by any new developments regarding the future of the Conservative Party and the Brexit process over the coming week.

As investors anticipate next week’s RBA meeting minutes, political news will drive the Pound to Australian Dollar (GBP/AUD) exchange rate.

Josh Jeffery

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