Near Weekly Worst for Pound Australian Dollar (GBP/AUD) Exchange Rate despite RBA Dovishness

Pound Australian Dollar Exchange Rate Under Pressure amid Lack of Drive Higher 

The Pound to Australian Dollar (GBP/AUD) exchange rate has been sliding this week, as the Australian Dollar (AUD) benefits from market risk-sentiment. The Pound (GBP) outlook is limited amid market uncertainty over the Brexit process. 

GBP/AUD movement has been mixed in recent weeks. GBP/AUD did touch on a month and a half low of 1.79 last week, but the pair generally remained in the region of 1.81. 

This week’s GBP/AUD movement has been more dovish, with the pair quickly shedding around a cent yesterday. At the time of writing, GBP/AUD is trending close to its worst weekly levels, in the interbank region of 1.80. 

The Reserve Bank of Australia’s (RBA) latest meeting minutes were dovish. Despite this though, the Australian Dollar continues to benefit from coronavirus vaccine hopes. 

Pound (GBP) Exchange Rates Avoid Further Losses amid Brexit Hopes 

Investors have been hesitant to sell the Pound too much this week, as the British currency benefits from hopes that a Brexit deal could soon be reached. 

Markets and officials expect some kind of deal will be reached this month. However, some analysts still express concern that negotiations could be pushed to the wire before any progress or lack of progress becomes evident. 

Speculation over a delay of deadlines in talks are keeping markets anxious. According to Ulrich Leuchtmann, Analyst at Commerzbank: 

‘I have been guessing for a while that the market is assuming a doable postponement of the Brexit deadline as the central scenario. And as a result, the recent news is confirmation of the predominant market view rather than cause to revalue the GBP exchange rates.’ 

Australian Dollar (AUD) Exchange Rates Appealing despite RBA Dovishness 

This morning saw the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes report. As expected, the bank indicated that it was prepared to ramp up easing in monetary policy to protect Australia’s economy from the impact of the coronavirus pandemic. 

As this stance from the RBA was largely expected already, it did little to influence a shift in Australian Dollar movement. 

Instead, the ‘Aussie’ continued to benefit from a market more willing to take risks. The Australian Dollar is often correlated to market risk and trade-sentiment, so coronavirus vaccine hopes have made it more appealing. 

Analysts at NAB said: 

‘The Moderna news overnight is the second positive vaccine news following Pfizer/BioNTech results last week, 

 

These are all very encouraging news, meaning that by late January/early February we could have vaccines being distributed to those in most need.’ 

Pound to Australian Dollar Exchange Rate May Fall Further Without Brexit Boost 

If there is no optimistic development in UK-EU Brexit negotiations within the coming sessions, the Pound Australian Dollar exchange rate could be in for further losses. 

The Pound’s movement is jittery, and strength likely depends on whether or not a Brexit deal can be made. Markets expect some kind of deal, so if talks continue to be drawn out or no-deal Brexit fears rise, the Pound could slump. 

This would make the Australian Dollar comparatively more appealing. The relatively risky ‘Aussie’ continues to benefit from coronavirus vaccine developments and hopes. 

Upcoming Australian data could boost the Australian Dollar’s appeal further if it impresses investors. 

Australian wage data will be published during tomorrow’s Asian session, followed by job market data on Thursday. Australia’s job market is key for the nation’s economy, so this data could be highly influential. 

Overall, the Pound to Australian Dollar exchange rate could see a notable shift in direction depending on upcoming developments with Brexit and Australian data. 

Josh Jeffery

Contact Josh Jeffery


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