Pound Australian Dollar (GBP/AUD) Exchange Rate Undermined by Brexit Jitters
The Pound Australian Dollar (GBP/AUD) exchange rate is edging lower this morning, as freshy Brexit jitters sap Sterling sentiment.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8361, down roughly 0.2% from this morning’s opening levels.
Pound (GBP) Stumbles amidst Fears UK will Trigger Article 16
The Pound (GBP) faces some resistance this morning, amidst ongoing concerns that the UK could trigger Article 16 of the Northern Ireland protocol.
Article 16 allows either the UK or EU to suspend parts of the protocol if it seen as leading to serious ‘economic, societal or environmental difficulties’.
The UK government claims that this threshold has already been met and it has threatened to trigger Article 16 if ongoing talks regarding the protocol remain deadlocked.
However, GBP investors fear that such a move would prompt a response from the EU and that this could quickly escalate into a UK-EU trade war.
Speaking to RTE Ireland’s deputy prime minister, Leo Varadkar, said that Ireland has already begin to make contingency plans for such an outcome, saying:
‘I don’t think anybody wants to see the European Union suspending the trade and cooperation agreement with Britain.
‘But if Britain were to act in such a way that it was resigning from the protocol, resigning from the withdrawal agreement, I think the European Union would have no option other than to introduce what we call rebalancing measures to respond.’
Australian Dollar (AUD) Capped by Risk-Off Mood
At the same time, the Australian Dollar’s (AUD) gains against the Pound have been capped this morning by a prevailing risk-off mood.
The appeal of the risk-sensitive ‘Aussie’ have been dented amidst concerns over the global rise in inflationary pressures and a modest equity selloff.
This has offset the publication of some upbeat data from China, which may have otherwise pushed the GBP/AUD exchange rate lower.
Pound Australian Dollar Forecast: Slowdown in UK Q3 GDP to Weigh on Sterling?
Looking to the second half of the week, it’s likely the publication of the UK’s latest quarterly GDP release will act as a key catalyst of movement in the Pound Australian Dollar exchange rate.
The preliminary GDP release could see the GBP/AUD exchange rate come under some pressure tomorrow morning as it is expected to report domestic growth slowed from 5.5% to 1.5% in the third quarter.
Should GDP print below expectations it may further reduce the odds of the Bank of England (BoE) hiking interest rates by the end of the year, placing considerable pressure on the Pound in the process.
In the meantime, the publication of Australia’s latest jobs report could undermine the ‘Aussie’ in overnight trade, as October’s release is forecast to show another rise in domestic unemployment, with the jobless rate predicted to climb to its highest levels since June.