Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate at Four-Month-Worst amid G20 Summit

Pound to Australian Dollar Exchange Rate Continues to Tumble on Trade Hopes

Unsurprising Australian data has meant that the domestic Australian economic outlook hasn’t changed much over the past week, but the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been continuously tumbling. This is due to hopes for trade developments at this weekend’s G20 Summit.

Despite the Pound’s (GBP) relatively subdued movement and limited outlook for most of the week, GBP/AUD has tumbled quite a ways since opening the week at the interbank level of 1.83.

GBP/AUD briefly attempted to hold its ground at the beginning of the week, but has since seen solid losses almost every day of the week.

After falling around three cents since Monday, GBP/AUD currently trends closely to its worst interbank rate since February – 1.80.

With the Pound’s movement relatively limited, the Pound to Australian Dollar exchange rate tumble this week has been more due to hopes for US-China trade developments bolstering support for the Australian Dollar (AUD).

Pound (GBP) Exchange Rates Remain Unappealing as Business Investment Misses Mark

Being driven mostly by movement in the Australian Dollar (AUD), the Pound to Australian Dollar (GBP/AUD) exchange rate has been little influenced by the Pound’s (GBP) movement – or lack thereof.

The Pound has been under pressure all week, with investors reluctant to make notable shifts on the British currency due to a lack of major political or economic developments.

Today’s UK data did little to influence the Pound’s movement or outlook either. Growth simply met expectations in its final Q1 report, while business investment fell short of expectations in Q1.

With data having little impact on Sterling, investors remain focused on UK politics and the perceived rising possibility of a worst-case scenario no-deal Brexit.

Brexiteer Boris Johnson remains the clear frontrunner of the Conservative Party leadership contest. Johnson, widely expected to be Prime Minister by the end of July, has repeatedly said he would rather deliver a no-deal Brexit than delay the process again.

Australian Dollar (AUD) Exchange Rate Rally Softens as G20 Summit Takes Place

Despite a lack of particularly supportive Australian data recently, the Australian Dollar (AUD) has been one of this week’s better performing major currencies as investors bought it on the latest trade hopes.

As the Australian Dollar is a trade-correlated currency and China is Australia’s biggest trade partner, speculation that US-China trade relations could improve thanks to this weekend’s G20 Summit in Osaka have led to stronger demand for the ‘Aussie’.

Investors are hoping that relations between the US and China could see a solid improvement when US President Donald Trump meets with China President Xi Jinping at the summit.

However, this also means the Australian Dollar’s gains are limited, and the currency may see weakness again if trade tensions worsen instead.

The Australian Dollar has also benefitted from Central Bank speculation this week.

Less dovish than expected comments from Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) officials, as well as continued Federal Reserve interest rate cut bets, helped the ‘Aussie’ to rally.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Focus on G20

The 2019 G20 Summit in Osaka begins in full today, and one of the most highly anticipated events of the summit for investors will be an expected meeting between US President Donald Trump and China President Xi Jinping.

Both leaders have been urged to reach an agreement for the stability of the global economy. Hopes that a deal could be reached have been the primary cause of the Australian Dollar’s (AUD) strength this week.

As a result, if no notable progress is made in US-China relations, the Australian Dollar could plunge again as perceived trade tensions worsen.

This is perhaps the best chance the Pound to Australian Dollar (GBP/AUD) exchange rate has of advancing any time soon, as Brexit and political uncertainties continue to dominate the Pound’s (GBP) appeal.

Of course, with Reserve Bank of Australia (RBA) interest rate cut bets still of high importance for investors, next week could also be highly influential.

The Pound to Australian Dollar (GBP/AUD) exchange rate’s movement could see significant movement if the RBA’s July policy decision surprises investors next Tuesday, or if upcoming Australian PMI, trade and retail data surprises investors.

Josh Jeffery

Contact Josh Jeffery