Pound Australian Dollar (GBP/AUD) Exchange Rate Pushes Higher as Hopes of UK-EU Progress Build

Hopes of Potential Brexit Deal Breakthrough Supports Pound Australian Dollar (GBP/AUD) Exchange Rate

Comments from UK foreign secretary Dominic Raab encouraged the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to trend higher this morning.

As Raab indicated that the UK and EU are ‘close’ to a potential trade deal the mood towards Pound Sterling (GBP) improved sharply.

The comments encouraged hopes that an extension to talks is still on the table, in spite of Boris Johnson’s earlier arbitrary deadline having now passed.

Even so, GBP exchange rates could face strong selling pressure if the prime minister takes a less positive stance in comments later today.

As long as the risk of a no-deal scenario remains this could keep the Pound on the back foot against its rivals for the foreseeable future.

AUD Exchange Rates Lack Traction Amid Risk Aversion

Lingering market anxiety over Covid-19 and the future of the global economy weighed heavily on the Australian Dollar (AUD), meanwhile.

With risk appetite proving largely limited on Friday morning AUD exchange rates were left biased to the downside in the absence of any fresh domestic data.

The appeal of the Australian Dollar could weaken further on the back of the release of the Reserve Bank of Australia’s (RBA) latest set of meeting minutes.

As investors expect to see policymakers maintain a cautious outlook on the economy, leaving the door open to further monetary policy loosening, this could drag AUD exchange rates lower.

Rising Chinese Growth Forecast to Shore up Australian Dollar

Further volatility looks set for the Australian Dollar as markets react to the third quarter Chinese gross domestic product report.

With forecasts pointing towards the growth rate accelerating from 3.2% to 5.2% on the year confidence in the underlying resilience of the world’s second-largest economy may improve.

This would offer a lift to the antipodean currency, given that it commonly functions as a market proxy for sentiment towards the Chinese economy.

On the other hand, if the Chinese growth rate fails to strengthen as far as anticipated this could see AUD exchange rates slipping once again.

As long as an end to the Covid-19 crisis remains a distant prospect the Australian Dollar may struggle to find any particular traction against its rivals.

UK Inflation Uptick May Bolster GBP/AUD Exchange Rate

Developments surrounding Brexit look set to dominate the outlook of the GBP/AUD exchange rate in the near term, thanks to lingering fears over the health of the UK economy.

However, the Pound may find a rallying point on Wednesday if September’s UK consumer price index improves as forecast.

After the negative monthly reading seen in August investors expect to see inflationary pressure pick back up in September, rising to 0.4%.

While this would still fall some way short of the Bank of England’s (BoE) inflation target any improvement could give policymakers less cause for dovishness, limiting the Pound’s downside potential.

Louisa Heath

Contact Louisa Heath