GBP/AUD Exchange Rate Flat as US-Iran Tensions Increase

Pound Australian Dollar (GBP/AUD) Exchange Rate Muted as Risk-Appetite Falls

Update: The Pound Sterling Australian Dollar (GBP/AUD) exchange rate has remained muted and the pairing is currently trading at an inter-bank rate of AU$1.8322.

Risk appetite slipped further on Monday afternoon as Iran announced it would breach the limit on its stockpile of enriched uranium on 27 June.

The limit was set under a 2015 nuclear deal with world powers, but Iran noted there was ‘still time’ for European countries to act.

However, Brexit pessimism and the increased threat of a no-deal continued to weigh on Sterling, leaving the pairing flat.

Pound Australian Dollar (GBP/AUD) Exchange Rate Flat, UK Business Investment set to Slump

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is rangebound this morning, with the pairing trading at an inter-bank rate of AU$1.8315.

Sterling has been struggling today as the British Chambers of Commerce (BCC) asserted that the 2019 business investment outlook in the UK is set to fall by the furthest in 10 years.

The forecast slump of -1.3% is said to be linked to the Brexit uncertainty looming over the economy.

Commenting on the data, BCC Director General Adam Marshall said that companies were struggling to press on with long-term plans due to the continued uncertainty of Brexit, saying:

‘Businesses are putting resources into contingency plans, such as stockpiling, rather than investing in ventures that would positively contribute to long-term economic growth.

‘This is simply not sustainable. Business communities expect the next Prime Minister to quickly find a sensible and pragmatic way forward to avoid a messy and disorderly Brexit.’

However, despite this morning’s poor performance, the GBP/AUD exchange rate is still trading over a cent higher than last weeks lows of $1.8184.

Australian Dollar (AUD) Exchange Rates Suppressed as Global Tensions Dampen Risk-Appetite

Tensions in the Middle East and Hong Kong continued to dampen risk-appetite, leaving the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate flat.

On Sunday, US Secretary of State Mike Pompeo told Fox News that President Donald Trump would raise the issue of human rights in Hong Kong with Chinese President Xi Jinping.

Commenting on the controversial extradition bill, which is what protesters in Hong Kong are railing against, Hiroyuki Ueno, Senior Strategist at Sumitomo Mitsui Trust Asset Management said:

‘Last week the issue looked as if it would become another thorny point between the United States and China. As the bill is now being postponed indefinitely, things will likely calm down, which is good for markets.’

At the same time, tensions in the Middle East increased as Saudi Arabia joined the US in blaming Iran for last Thursday’s tanker attacks in the Gulf of Oman.

In an interview with state-owned newspaper, Asharq Al-Awsat, Saudi Crown Prince Mohammed bin Salman blamed Iran and called for other countries to take a ‘decisive stand’.

The Crown Prince also noted:

‘The kingdom does not want a war in the region but it will not hesitate to deal with any threats to its people, its sovereignty, or its vital interests.’

As a higher-risk currency, any geopolitical tensions have a tendency to weigh on Australian Dollar (AUD) exchange rates.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook: Will a Dovish RBA Weigh on AUD?

Looking ahead to Tuesday, the Australian Dollar (AUD) could slump against the Pound (GBP) following the release of the latest Australian House Price Index.

If house prices dropped further than expected during the first three months of 2019, it could dampen Aussie sentiment.

Additionally, the Australian Dollar could fall further following the release of the Reserve Bank of Australia’s meeting minutes.

If the minutes hint at a further interest rate cut, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate could rally.

Millie Empson

Contact Millie Empson