Pound to Australian Dollar (GBP/AUD) Exchange Rate Dips as ‘Aussie’ Benefits from Hopes of China’s Economic Recovery

GBP/AUD Exchange Rate Falls as Markets Hope RBA Will Retain its Benign Policy Stance

The Pound to Australian Dollar (GBP/AUD) exchange rate dipped this morning, with the pairing currently fluctuating around AU$1.822.

The Australian Dollar (AUD) has benefited from an increasingly positive outlook for the ‘Aussie’, with analysts confident that the Reserve Bank of Australia (RBA) will retain its benign policy stance. China’s recovering economy is also proving AUD-positive.

Daniel Been, Head of G3 Research at ANZ, commented:

‘The AUD should hold up relatively well in all of this, with the RBA holding the line and China recovering well.’

With China being Australia’s largest trading partner, news that the world’s second-largest economy is improving has buoyed the risk-averse ‘Aussie’.

Today saw the release of Australia’s private capital expenditure for the second quarter, which fell less-than-expected from -2.1% to 5.9%. Forecasts were starker, with an expected decrease of -8.4%.

Meanwhile, non-mining investment dropped by a whopping -8% in the second quarter and is now down by -17.3% over the year.

Kristina Clifton, an economist at Australia’s Commonwealth Bank (CBA), commented:

‘That is a very large contraction. Business investment tends to be driven by consumer demand rather than interest rates and is very often one of the last parts of the economy to lift once a recovery is underway.’

Meanwhile, Australian Dollar (AUD) investors will be eyeing today’s Jackson Hole symposium in the US. Any dovishness about the global economy from key central bankers would weigh on risky assets like the ‘Aussie’.

Pound (GBP) Subdued as Brexit Talks Show Lack of ‘Tangible Progress’ According to Brussels

The Pound (GBP) has continued to struggle from concerns over UK-EU relations after Germany scrapped discussions at Brexit at the latest EU ambassadors’ summit. Brussels lamented that the UK had ‘completely wasted’ Brexit talk which had led to a lack of any ‘tangible progress.’

Sandro Gozi, an Italian MEP, commented:

‘We have had the whole summer completely wasted, a cabinet that doesn’t understand how the negotiations work, a prime minister who, I think, doesn’t understand how the negotiations work – because he is under the wrong impression that he can pull off negotiating at the 11th hour.’

Consequently, Sterling struggled today as fears of a no-deal Brexit on December 31st weigh on UK markets.

GBP/AUD Forecast: Could American Economic Gloom Drag Down the ‘Aussie’?

Pound (GBP) investors will be awaiting tomorrow’s speech from Andrew Bailey, the Governor of the Bank of England (BoE). As a result, downbeat comments about the UK’s economy would prove GBP-negative.

Meanwhile, Brexit developments will also remain in focus for the rest of this week. If, however, UK-EU trade negotiations show any signs of progress, then we could see Sterling edge higher.

Australian Dollar (AUD) traders will be keeping a close eye on global economic news. Any signs of a dovish outlook for America’s economic recovery would drag down the AUD/GBP exchange rate.

David Moore

Contact David Moore