GBP/AUD Exchange Rate Rangebound as Brexit Concerns Offset GDP Release
The Pound to Australian Dollar (GBP/AUD) exchange rate is stuck in a narrow range this morning as ongoing Brexit uncertainty offsets a stronger-than-expected UK GDP release.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8001, virtually unchanged from this morning’s opening rate.
Improved GDP Figures Fail to Boost the Pound (GBP)
The Pound (GBP) is struggling to find support this morning, in spite of the UK’s latest GDP figures printing above expectations.
According to data published by the Office for National Statistics (ONS), the UK’s final GDP reading for the second quarter reported that economic growth shrank 19.8%, slightly beating the previous estimate of a 20.4% contraction.
Despite the upward revision, this is still the largest quarter-on-quarter fall on record and confirms the UK slipped into a deep recession in the second quarter as it reeled from the impact of the country’s nationwide coronavirus lockdown.
Jonathan Athow, the ONS’s deputy national statistician and director-general for economic statistics, said:
‘More complete data has not substantially changed the economic picture, with the UK economy still shrinking by around a fifth in the first half of the year, far bigger than any previous contraction on record.’
The failure of Sterling to capitalise on the stronger-than-expected GDP release can in part be attributed to the continued uncertainty surrounding Brexit as UK-EU trade talks continue.
While GBP investors were filled with optimism at the start of the week, following reports talks were entering a ‘tunnel’, this optimism has begun to fade as it’s become that a number of sticking points between both sides are hindering progress.
Australian Dollar (AUD) Sidelined by Risk-Off Trade
Meanwhile, the Australian Dollar (AUD) is subdued this morning as a result of a risk-off tone in markets.
This comes in the wake of last night’s US presidential debate, which saw Joe Biden and Donald Trump clash in a bitter and chaotic exchange.
Markets were particularly unnerved by Trump’s refusal to say whether he would accept the result of the election, with US political uncertainty driving market risk adversion.
GBP/AUD Forecast: Brexit to Remain in Spotlight
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate may remain subdued through the second half of the session as the focus remains squarely on Brexit.
This is likely to see Sterling continue to struggle so long as talks remain deadlocked and the risks of the no-deal Brexit grow.
On the other hand, there is a lot of room for GBP exchange rates to rally should the two sides make any substantial progress towards a deal.
Meanwhile, the ‘Aussie’ looks poised to fall in the latter half of the week as Australia’s latest retail sales release is set to confirm sales growth collapsed in August.