Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Falling after Reserve Bank of Australia Minutes

Pound to Australian Dollar Exchange Rate Tumbles on Fresh No-Deal Brexit Fears

Following last week’s solid Pound Sterling to Australian Dollar (GBP/AUD) exchange rate gains, the pair is already falling again this week. As the Pound (GBP) is weakened by fresh Brexit jitters, the Australian Dollar (AUD) was supported by Reserve Bank of Australia (RBA) speculation.

Last week saw GBP/AUD gain two cents, climbing from the interbank level of 1.77 and closing at around 1.79.

This week though, GBP/AUD has already lost over half a cent and trends in the interbank region of 1.78 at the time of writing.

While the latest RBA news wasn’t hugely surprising, it did offer the Australian Dollar some support following weeks of worsening US-China trade jitters.

Pound (GBP) Exchange Rates Tumble amid Anxiety over Fresh UK-EU Brexit Talks

The Pound (GBP) rebounded on hopes that Britain’s opposition parties could cooperate to prevent a no-deal Brexit last week, but this week the British currency has slipped back and shed some of those gains.

No-deal Brexit fears persist, clouding over the outlook even amid hopes that it could be prevented.

Fresh concerns that the UK Boris Johnson government will be unable to reach any kind of agreement with the EU over Brexit put additional pressure on the Pound today, which played a significant part in GBP/AUD losses.

Boris Johnson wrote to European Council President Donald Tusk, showing willingness to negotiate a Brexit agreement if the controversial Irish backstop is scrapped.

The EU once again rejected the request, saying the backstop was a core part of the agreement and would not be renegotiated:

‘The withdrawal agreement is not open for renegotiation and the backstop is not open for change. A legally operable backstop to avoid a hard border remains central to the withdrawal agreement for the EU27.’

Australian Dollar (AUD) Exchange Rates Supported as Reserve Bank of Australia (RBA) Fears Lighten

Investors have been increasingly anxious about global trade tensions and growth slowdown in recent weeks, which had led to higher speculation that many major central banks will continue to ease monetary policy further.

However, the Reserve Bank of Australia (RBA) had indicated that it may not turn as dovish as some other major central banks.

The RBA continued to signal that outlook during its latest meeting minutes report, published overnight. This helped the Australian Dollar to strengthen today.

Rather than show any signs that it was looking to ramp up its dovishness, the RBA maintained its steady outlook. The bank indicated it would not cut interest rates in September and that further rate cuts later on, while fairly likely, would be dependent on data.

The minutes also showed the bank was confident that a weaker AUD would lead to stronger Australian exports. Overall, the minutes helped the Australian Dollar to steady.

Pound to Australian Dollar (GBP/AUD) Exchange Rate May See Further Losses if Trade-Sentiment Improves

Much of the Australian Dollar’s (AUD) recent weakness has been caused by global trade and growth fears, as the US-China trade war flares up again.

As a result, hopes that Australian exports will be resilient are supporting AUD, and any further news giving investors reason to be optimistic on trade would also bolster demand for the currency.

If there are any positive developments in US-China relations the Australian Dollar could rise and push GBP/AUD lower.

However, amid concerns that US trade protectionism could loom over the upcoming G7 summit later this week, the ‘Aussie’ could be in for fresh losses as well.

Sterling (GBP) movement will be driven mostly by Brexit developments and speculation this week.

While relatively low influence, UK borrowing and Australian PMI projections due in the coming days could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate.

Josh Jeffery

Contact Josh Jeffery