Pound to Australian Dollar Exchange Rate Pressured by No-Deal Brexit Fears
Yesterday saw a brief surge in demand for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate, but the jump was short-lived. As the Australian Dollar (AUD) rebounded from its sharp dip, the Pound (GBP) outlook continued to worsen under Brexit fear.
Following last week’s dip to a 2019 low of 1.75, GBP/AUD has been recovering.
GBP/AUD is still up from this week’s opening interbank level of 1.78, and currently trends near the interbank level of 1.79. However, the pair has been unable to hold near the monthly high of 1.81 it briefly climbed to yesterday morning.
Investors bought the Australian Dollar back following its tumble, amid speculation that the Reserve Bank of Australia (RBA) may not become as dovish as the Reserve Bank of New Zealand (RBNZ) is becoming.
Anticipation for upcoming RBA comments tomorrow, as well as pervasive Brexit fears, are weighing on the Pound to Australian Dollar exchange rate outlook.
Pound (GBP) Exchange Rates Struggle to Recover as No-Deal Brexit Bets Rise
While the Pound’s (GBP) movement has cooled this week, following the sharp movements seen in July and the beginning of the month, investors still have little reason to buy the British currency.
Some investors have been buying the Pound back from its lows in profit-taking, but its potential for gains has been limited as fears of a worst-case scenario no-deal Brexit have risen higher and higher since Brexiteer Boris Johnson became UK Prime Minister.
A fresh Reuters poll published today indicated that bets of a no-deal Brexit had jumped even higher since Johnson came into power.
Economists now forecast a median 35% chance of a no-deal Brexit at the end of October, the highest figure since Reuters began asking the question.
According to Daniel Vernazza, Chief International Economist at UniCredit:
‘Until now, it was difficult to know what a Johnson-led government would do about Brexit, given his indecisiveness, unpredictability and, at times, conflicting messages on Brexit,
However, it now seems pretty clear that Boris Johnson’s strategy is to try to force through a no-deal Brexit on October 31,’
Australian Dollar (AUD) Exchange Rates Regain Losses as Markets Cool
During yesterday’s Asian session, the Australian Dollar (AUD) plummeted as investors digested the Reserve Bank of New Zealand’s (RBNZ) shock decision to cut interest rates by 50 basis points.
Due to New Zealand and Australia’s close economic ties, the Australian Dollar fell in response to the news, with Reserve Bank of Australia (RBA) interest rate cut speculation rising as well.
However, the AUD tumble was short-lived, and by the end of yesterday’s session the currency had regained the worst of its daily losses.
This was due to multiple factors, such as hopes that US-China trade negotiations would continue despite the recent surge in tensions, as well as speculation that the RBA was hesitant to become much more dovish.
The RBA has recent questioned the effectiveness of interest rates going lower and lower. Investors are anticipating tomorrow’s comments from RBA Governor Philip Lowe before making more big movements on AUD.
On top of this, the Australian Dollar’s recovery was supported by today’s stronger than expected Chinese trade balance report. As China is Australia’s biggest trade partner, the strong Chinese trade data bolstered AUD demand.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Await Comments from RBA’s Lowe
The Pound to Australian Dollar (GBP/AUD) exchange rate isn’t trending too far from the week’s opening levels, as the Pound’s strength is weighed by Brexit fears while the Australian Dollar (AUD) is held back by US-China trade tensions and central bank speculation.
As Friday’s session will see notable central bank news and data though, GBP/AUD could still end the week either lower or higher depending on how they unfold.
Reserve Bank of Australia (RBA) Governor Philip Lowe will hold a speech during Friday’s Asian session.
If he offers thoughts on the Reserve Bank of New Zealand’s (RBNZ) surprisingly dovish interest rate cut, or any shift in tone regarding the RBA monetary policy outlook, the Australian Dollar could see some significant late-week movement.
The Pound (GBP) outlook is likely to remain under pressure amid Brexit fears, but it could find a little fresh support if tomorrow’s UK growth rate or business investment stats beat expectations.
With AUD still pressured by US-China trade jitters as well, any optimistic developments in global trade relations could boost AUD and cause the Pound to Australian Dollar (GBP/AUD) exchange rate to fall.