Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs, Sinks on Brexit Headwinds

The Pound Australian Dollar (GBP/AUD) exchange rate firmed through the first half of last week on Bank of England (BoE) tailwinds; UK retail sales increased in the run-up to December.

Brexit headwinds subsequently applied pressure as UK-EU talks deteriorated. Australian Dollar (AUD) trading sentiment was also dampened by weak employment data.

What’s Been Happening: Brexit Talks Weigh upon GBP

The Pound Australian Dollar exchange rate climbed on Monday on central bank dynamics- hawkish comments from BoE Governor Andrew Bailey supported the Pound (GBP) while AUD investors were bearish over the Reserve Bank of Australia (RBA)’s dovish policy stance.

On Tuesday, UK retail sales boosted GBP further, while Australian commodity prices put pressure upon the ‘Aussie’.

Midweek, Sterling fell as Brexit tensions came to a head: RTE Ireland’s deputy Prime Minister Leo Varadkar revealed that Ireland had was making contingency plans in case of a trade war.

Meanwhile, as a proxy for the Chinese economy, the Australian Dollar benefitted from rising inflation in China and better-than-expected loans figures.

GBP sentiment remained subdued on Thursday as GDP figures missed quarterly expectations. Against AUD however, the Pound strengthened as Australian employment data revealed a larger-than-expected increase in unemployment.

On Friday, Sterling consolidated its gains as Brexit headwinds eased slightly. The ‘Aussie’ was buoyed by news that Chinese property developer Evergrande once again avoided a default.

Three Things to Watch Out for This Week

  1. Key UK Data

The UK will print employment data this week, alongside inflation figures and retail sales.

  1. RBA Speeches and Minutes

The latest RBA meeting minutes will be released on Tuesday, followed by a speech from Governor Philip Lowe. Policymaker Tony Richards will subsequently speak on Thursday.

  1. Brexit Dynamics

Given last week’s tense negotiations, Brexit discussions this week are likely to influence GBP trading.

Pound Australian Dollar Forecast

Looking ahead, GBP/AUD is likely to be influenced by a clutch of significant UK data this week, as well as by RBA forward guidance. Brexit developments may also affect the Pound Australian Dollar exchange rate.

Olivia Evershed

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