Political Uncertainty Fuels Pound Australian Dollar (GBP/AUD) Exchange Rate Rebound

UK Political Speculation Fuels Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Recovery

The suggestion that MPs could still potentially avert a no-deal Brexit scenario helped to shore up the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate this morning.

With limited time left before the October deadline markets remain sensitive to any shifts in the UK political landscape.

As long as the UK still appears at high risk of crashing out of the EU without a deal any support for Pound Sterling (GBP) could prove rather short-lived in nature.

Reports of a potential snap general election may also diminish the appeal of the Pound over the coming days, especially if the event looks set to fall after the 31st October.

Stronger Business Confidence Set to Boost Australian Dollar (AUD) Exchange Rates

Demand for the Australian Dollar (AUD) could pick back up overnight, however, if July’s NAB business confidence index shows an improvement on the month.

Evidence that sentiment within the Australian economy is recovering, in spite of ongoing global trade tensions, would give AUD exchange rates a fresh rallying point.

With global trade looking set to continue its deterioration in the months ahead any signs of resilient Australian sentiment could ease worries over the domestic outlook.

On the other hand, if the index weakens further from the modest reading of 2 seen in June the mood towards the antipodean currency could sour sharply.

Any fresh escalation in trade tensions between the US and China, or any of its other trading partners, could also weigh down AUD exchange rates.

Australian Dollar Looks for Support from Consumer Confidence Rebound

With markets expecting to see a modest rebound from the Westpac consumer confidence index AUD exchange rates may find additional support on Wednesday.

After the sharp -4.1% decline seen in July there are hopes that consumer sentiment returned to a positive trend in August.

As a stronger level of confidence could help to fuel an increased level of domestic spending this may encourage the Australian Dollar to make additional gains.

Any positive change in the second quarter wage price index may also offer a boost to AUD exchange rates, with markets still looking for evidence of economic resilience.

Stronger Wage Growth May Boost Pound Sterling Appeal

Tomorrow’s raft of UK labour market data may provoke a fresh bout of Pound Sterling weakness, meanwhile.

Signs that the labour market is struggling to tighten in the face of ongoing Brexit-based uncertainty could put a dampener on the GBP/AUD exchange rate.

However, investors could find additional incentive to buy into the Pound if June’s weekly earnings figures strengthen as forecast.

Investors expect to see average weekly earnings grow 3.7% on the year in the three months to June, something which could bolster household spending in the months ahead.

A higher level of wage growth may help to limit the impact of rising inflation, shoring up levels of consumer spending and supporting stronger levels of economic activity.

Even so, a strong uptick in earnings might not be enough to shore up the GBP/AUD exchange rate as long as the atmosphere of political anxiety persists.

Louisa Heath

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