GBP/AUD Exchange Rate Falls as UK Draws Up New Brexit Legislation: Pound to Australian Dollar Weekly Forecast

The Pound to Australian Dollar (GBP/AUD) exchange rate fell today after it was revealed that the UK was planning new legislation that will override part of the Brexit withdrawal agreement.

 

Last Week: GBP/AUD Exchange Rate Sinks as Brexit and Redundancies Threat Weigh on Sterling

Last week saw the GBP/AUD exchange rate fluctuate between highs of AU$1.82 to lows of AU$1.80 as concerns over Brexit dragged on Pound (GBP) exchange rates.

Tuesday saw Michel Barnier, the EU’s Chief Negotiator, enter informal talks with his British counterpart, David Frost.

Mr Barnier complained of being ‘worried and disappointed’ about the lack of progress in UK-EU talks. This sparked off fears of a possible no-deal Brexit on December 31st.

Meanwhile, the ‘Aussie’ was supported by strong Australian building permits figure for July.

Tuesday also saw the Reserve Bank of Australia (RBA) hold its interest rates at record lows of 0.25%. The AUD/GBP exchange rate rose after RBA Governor Philip Lowe said the rate was unlikely to go any lower.

Laing Simmons, the managing director Leanne Pilkington, said:

‘Low, steady interest rates for the foreseeable future are appropriate to support the recovery.’

However, the Australian Dollar (AUD) suffered on Wednesday after Australia officially entered its first recession in 30-years. The quarter-on-quarter  GDP figure dropped from -0.3% to -7%.

Michael Smedes, the Head of National Accounts at ABS, said:

‘The global pandemic and associated containment policies led to a 7.0 per cent fall in GDP for the June quarter’

Sterling clawed back some of its losses on Thursday when August’s UK services PMI remained robust at 58.8. As a result, GBP investors had become more optimistic about Britain’s largest and most lucrative sector.

Friday saw the GBP/AUD exchange rate sink after the UK construction PMI for August showed signs of losing steam. The figure dropped unexpectedly from 58.1 to 54.6.

Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, said:

‘This stalled progress was not a surprise given the warning signs last month that any hard-won progress could start to fizzle out.’

Three Things to Watch out for This Week

  1. Brexit Developments

Following Boris Johnson’s to push for a sign-off on a trade deal by October 15th, GBP investors will be following Brexit developments. Any indications of yet another impasse on a post-Brexit trade deal would prove GBP-negative.

  1. Australian Consumer Inflation Expectations

Wednesday will see the release of September’s Australian Westpac consumer confidence gauge. If this remains in the doldrums, however, we could see the ‘Aussie’ suffer.

  1. UK Growth Data

Sterling investors will be eyeing Friday’s publication of the final UK GDP figure for July. If this confirms consensus and dips 6.7%, then we could see the GBP/AUD exchange rate drop on concerns for the British economy.

GBP/AUD Exchange Rate Outlook

The GBP/AUD exchange rate will face a lot of volatility this week as new and rising concerns over the possibility of a no-deal Brexit on December 31st will continue to drag down Sterling.

David Moore

Contact David Moore


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