Risk Sentiment Keeps Pressure on Pound Australian Dollar (GBP/AUD) Exchange Rate

Pound to Australian Dollar (GBP/AUD) Exchange Rate Struggles on UK Election Uncertainty

The Pound to Australian Dollar (GBP/AUD) exchange rate continued to trend lower this week, as the Australian Dollar (AUD) pushed higher on Reserve Bank of Australia (RBA) and global trade news. At the same time, British politics, the unpredictability of the upcoming UK election and prevailing Brexit headwinds dragged on the Pound (GBP).

Following last week’s tumble of almost a cent from the interbank rate of 1.88 to 1.87, GBP/AUD may face another week of losses.

At the time of writing, GBP/AUD is trending near the interbank level of 1.86. GBP/AUD, a slight recovery from yesterday’s worst level in half a month, but still a loss of around half a cent since Monday.

The Pound (GBP) outlook remains clouded with uncertainty as the main political parties embark on their campaign trails ahead of next month’s UK election, while the Australian Dollar has found renewed support on hopes that the Australian economy will remain resilient.

Pound (GBP) Exchange Rates Lack Drive amid Expectations for Month of Uncertainty

Investors have been hesitant to make big moves on the Pound (GBP) this week as the outlook for the British currency remains largely unchanged since last week.

Instead, predictions are for a month of political uncertainty ahead of the UK election, with a lack of clarity maintaining pressure on Sterling.

Polls forecast a Conservative Party win and GBP investors have welcomed this news, with a Tory majority on December 12th expected to break the parliamentary Brexit deadlock.

But with the election described as one of the most unpredictable public polls since the 2016 referendum, a sense of uncertainty prevails, meaning this week’s stronger than expected UK PMIs have failed to make much of an impact on the Pound outlook.

For now, investors will await further political news and tomorrow’s Bank of England (BoE) policy decision. While the central bank isn’t expected to make any changes to monetary policy, a dovish tone over the UK economy could see GBP slide.

Australian Dollar (AUD) Exchange Rates Sturdy on Hopes for US-China Trade Deal

Despite some disappointing Australian retail sales stats at the beginning of the week, the Australian Dollar (AUD) has seen a fairly strong week.

The Reserve Bank of Australia (RBA) surprised investors with a more cautiously neutral tone than expected, indicating it was unlikely to cut Australian interest rates in December.

The Australian Dollar jumped as December rate cut bets lightened, while rising hopes for a resolution to the US China trade war heralded a risk-on market, offering the risk-sensitive ‘Aussie’ some further support.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Fall if Bank of England (BoE) Expresses Concerns

For the time being, the Pound (GBP) continues to hold most of its recent gains amidst hopes that a general election will make a no-deal Brexit less likely.

However, some analysts believe current Sterling optimism could lighten if investors become more anxious about the next Brexit deadline. According to Jane Foley, Senior Currency Strategist at Rabobank:

‘There is a lot of pressure to get a trade deal done in a very short period of time and Barnier is indicating that could be tough,

So for Sterling there is the possibility that a lot of good news that was built into the price in October could start to seep out,’

As a result, more pessimistic news could impose fresh pressure on the Pound.

The Bank of England (BoE) isn’t expected to make any changes to its monetary policy on Thursday, but political uncertainty ahead of the UK election, Brexit jitters and a recent raft of weak ecostats could prompt some dovish commentary from policymakers which would undermine Sterling.

Meanwhile, the Australian Dollar (AUD) will likely cling to this week’s gains if upcoming Australian data continues to impress.

Thursday’s Asian session will see the publication of Australia’s construction PMI for October and trade balance for September which could see the ‘Aussie’ cling to this week’s gains if they impress. US China trade developments will continue to influence GBP/AUD exchange rates in the days ahead.

Josh Jeffery

Contact Josh Jeffery