Short-Lived Brexit Optimism Sees Pound Australian Dollar (GBP/AUD) Exchange Rate Soften

Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as Brexit Hopes Fade

Yesterday’s bout of Brexit optimism ultimately proved to be short-lived, leaving the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate under renewed pressure.

Demand for Pound Sterling (GBP) diminished in response to the latest comments from French President Emmanuel Macron, who indicated that nothing has ultimately changed with regards to Brexit.

With Boris Johnson’s visit to the French and German leaders having failed to yield any progress towards a deal investors saw little reason to favour the Pound ahead of the weekend.

As Conservative Brexiteers also offered fresh criticism of the existing withdrawal agreement, highlighting objections to more than just the Irish backstop, hopes of a potential breakthrough faded.

Unless officials can find a mutually agreeable solution to the Irish border issue GBP exchange rates look set to remain biased to the downside.

Jackson Hole Comments Set to Provoke Australian Dollar (AUD) Exchange Rate Volatility

Anticipation ahead of key policymaker speeches at the Jackson Hole Symposium helped to shore up the Australian Dollar, meanwhile.

As the Federal Reserve has come under increasing political pressure to cut interest rates further, weighing down the US Dollar (USD), the appeal of the risk-sensitive AUD has improved.

However, Sunday’s speech from Reserve Bank of Australia (RBA) Governor Philip Lowe could put a dampener on the antipodean currency.

If Lowe shows signs of increased caution over the economic outlook this could fuel bets that the RBA will cut interest rates to a fresh record low before the end of the year.

On the other hand, a greater display of confidence from Lowe could see the GBP/AUD exchange rate extend its slide further.

Australian Dollar Remains Sensitive to Global Market Trade Tensions

Any fresh deterioration in global trade relations may prompt investors to sell out of the Australian Dollar in the days ahead.

As long as the US remains on course to implement an additional raft of tariffs on Chinese products this is likely to keep market risk appetite in check.

Even so, if the US Dollar comes under further pressure over the possibility of additional Fed monetary loosening this could benefit the antipodean currency.

AUD exchange rates could still weaken on any signs of increased dovishness among other RBA policymakers in the days ahead.

Brexit Speculation Forecast to Keep GBP/AUD Exchange Rate Under Pressure

Speculation over Brexit looks set to dominate the outlook for GBP exchange rates, especially with fresh UK data thin on the ground next week.

With worries over the underlying health of the domestic economy already elevated any further increase in the odds of a no-deal scenario could weigh heavily on the Pound.

However, if MPs continue to mobilise in an effort to stop the UK crashing out of the EU without a deal in October this may offer some support to the GBP/AUD exchange rate.

Bets on the possibility of an imminent general election could also drive volatility for the Pound, with a sense of political turmoil set to linger for the foreseeable future.

Louisa Heath

Contact Louisa Heath