GBP/AUD Exchange Rate Knocked by Brexit Jitters
The Pound to Australian Dollar (GBP/AUD) exchange rate opens this week on the back foot as lingering Brexit fears continue to exert pressure.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9281, down roughly 0.2% from the day’s opening levels.
Pound (GBP) Undermined by Brexit Concerns
The Pound (GBP) is struggling to find support this morning as Brexit uncertainty continues to limit the appeal of the UK currency.
GBP investors appear particularly concerned by comments made by US Vice President Mike Pence, just before the weekend.
Speaking to US broadcaster CNBC, Pence expressed the US government’s disappointment with Boris Johnson’s decision to allow Chinese telecoms giant Huawei to play a role in the UK’s 5G network, hinting it could jeopardise a post-Brexit UK-US trade deal.
‘The United States is very disappointed that the United Kingdom has decided to go forward with Huawei.
‘We are profoundly disappointed … When I went at the president’s direction in September I met with Prime Minister Johnson and I told him the moment the UK was out of Brexit we were willing to begin to negotiate a free trade arrangement with the UK.’
Johnson has frequently talked up a UK-US free trade deal as being one of the biggest benefits of Brexit, so news it could be at risk has unsurprisingly spooked GBP investors this morning.
Australian Dollar (AUD) Buoyed by Rebound in Chinese CPI but Coronavirus Fears Cap Gains
Meanwhile, the Australian Dollar (AUD) was given a leg up this morning by the release of China’s consumer price index (CPI).
China reported domestic inflation rocketed to an eight-year high in January, as it roared up from 4.5% to 5.4%, sailing past expectations for a more modest rise of 4.9%.
The Australian Dollar’s status as a China proxy resulted in AUD exchange rates surging higher in early trade this week.
However the ‘Aussie’ has subsequently given up some of these gains on the back of ongoing concerns over the coronavirus outbreak in China.
As the death toll rose to over 900, topping the number of victims of the Sars outbreak in 2003, and the number of reported cases continue to grow, markets are growing increasingly concerned by the virus’s potential impact on the global economy, capping upside in AUD this morning.
GBP/AUD Forecast: Sterling to Fall as UK Economy Stalls in Q4?
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to face some pressure on Tuesday as the UK publishes its latest GDP report.
Barring a major explosion of growth in December tomorrow’s data looks set to confirm that the UK economy stagnated in the last quarter of 2019 amidst heightened politic uncertainty.
Also likely to exert pressure on Sterling will be the accompanying business investment report, as economists predict investment will have begun to contract again in the fourth quarter.
In the meantime the Australian Dollar may take a knock overnight if Australian business confidence index remained in negative territory in January.