Pound Australian Dollar Exchange Rate Sinks despite Rising UK Consumer Confidence

GBP/AUD Exchange Rate Falls as UK Consumer Confidence Remains ‘Anaemic’

The Pound Australian Dollar (GBP/AUD) exchange rate fell by -0.4% this morning, with the pairing currently trading around AU$1.817. The decline came despite the UK’s GfK consumer confidence index edging to an unexpected improvement of -14 to -12 in September.

Joe Staton, Client Strategy Director at GfK, commented:

‘Yes, all sub measures are higher, but they are anaemic in the case of our purchase intentions and how we view our wallets, while the results on the wider economy are still depressed. This month, British consumers appear to be treading water during this wait-and-see run-up to 31 October.’

However, Sterling failed to gain against the ‘Aussie’ as political uncertainties surrounding Brexit continue to haunt UK markets and Prime Minister Boris Johnson remains unyielding in his determination for an October 31 exit from the EU.

Dominic Cummings, the Prime Minister’s Chief Advisor, was quick to explain that controversies surrounding parliament can only be resolved by ‘honouring its promise to respect the [referendum] result’.

With the Benn Act now placing pressure on Boris Johnson to pass a Brexit deal through parliament before 19 October, but no evidence of negotiations, UK markets are becoming increasingly nervous.

AUD/GBP Exchange Rate Edges Higher on Increased Risk Appetite

The Australian Dollar (AUD) benefited from increased risk appetite as US-China trade talks appeared to lean nearer toward an agreement next month. This followed favourable comments from China’s Foreign Minister Wang Yi who said ‘both sides have shown goodwill’. At the same time, the US have granted tariff exemptions on hundreds of Chinese products.

Mr Yi added:

‘We hope both sides are able to take more proactive steps and minimise pessimistic language and actions. If everyone does this, I believe the [trade] talks will not only resume but move forward.’

However, the ‘Aussie’ has seen recent gains clipped as traders anticipate a Reserve Bank of Australia (RBA) rate cut on Tuesday.

Sean Callow, a Strategist at the financial services company Westpac, commented:

‘We are comfortable with our long-held call for the RBA to cut the cash rate [from 1%] to 0.75% on Tuesday. A rate cut is about 75% priced, so [the Australian Dollar] seems vulnerable to further decline.’

GBP/AUD Outlook: Sterling Could Rise if Hard-Brexit is Challenged

Pound traders will be looking ahead to Monday’s release of the UK’s Q2 growth figure which is expected to improve from -0.2% to 0.5%. This could provide some encouragement for the GBP/AUD exchange rate as the UK economy defies Brexit uncertainty by showing signs of improvement.

Meanwhile, ‘Aussie’ investors await Monday’s release of September’s AiG performance of management index. An improvement could further bolster confidence in the Australian economy and temper the RBA’s rate statement on Tuesday.

Brexit developments will dictate movement in the GBP/AUD exchange rate next week with any indication the Government face a challenge over its hard-Brexit stance offering some support to the Pound.

David Moore

Contact David Moore