Pound Australian Dollar (GBP/AUD) Exchange Rate Down as Brexit Fears Undermine Positive PMIs

Pound Australian Dollar (GBP/AUD) Exchange Rate Falls following PMIs 

The Pound Australian Dollar (GBP/AUD) exchange rate has fallen this morning as Brexit concerns undermine the Pound (GBP) despite strong UK PMI results. 

Meanwhile, Australia’s PMIs were also positive, which seems to have provided the ‘Aussie’ enough support to gain on a weakening Pound. 

Pound (GBP) Undermined by Brexit Concerns 

The Pound has slipped this morning despite the UK’s November flash PMIs beating forecasts. 

Both the manufacturing and services PMIs came in slightly above economists’ expectations to show strong business-activity expansion this month. However, inflationary pressures are building and ongoing supply chain disruption continues to limit manufacturing growth. 

Brexit concerns are also weighing on Sterling. Over the weekend, the European Commission Vice-President Maroš Šefčovič accused the UK Brexit Minister Lord Frost of ‘political posturing’ after Lord Frost called for ‘more urgency’ from the Northern Ireland negotiations. 

Speaking on BBC One’s The Andrew Marr Show, Šefčovič said ‘sometimes I have the feeling that in our meetings I’m the only one who pushes for urgent solutions’. 

The comments suggest that the UK and the EU are still deadlocked over the Northern Ireland protocol, raising fears that they will not reach an agreement. 

In a speech at a conference on global trade run by the Centre for Policy Studies, Frost once again hinted that the UK could trigger Article 16: 

‘When we discuss trade in this country, we must not forget that our most urgent and pressing problem – an issue of the highest national interest – is to make sure we can trade freely within our own country. 

‘I don’t think that’s too much to ask and that’s where we need to get to one way or another.’ 

Australian Dollar (AUD) Capped by Risk-Off Mood 

The Australian Dollar (AUD), meanwhile, has managed to strengthen against Sterling. 

Overnight, Australia’s Markit PMIs showed that the pace of expansion in both manufacturing and the services sector increased this month. Australia’s manufacturing PMI edged up from 58.2 to 58.5, as expected, and the services PMI rose from 51.8 to 55, beating forecasts of 54. 

However, the risk-sensitive Australian Dollar’s gains are capped today by a prevailing bearish market mood. Surging Covid cases in Europe have led to new restrictions, most significantly a full national lockdown in Austria announced at the end of last week. Concerns that further lockdowns could derail the continent’s economic recovery are weighing on markets today. 

GBP/AUD Exchange Rate Forecast: Risk Appetite in Focus Today 

If the market mood improves then the ‘Aussie’ may be able to make further gains against the Pound as the session goes on. As for Sterling, any more Brexit news or comments could affect GBP/AUD. 

Later in the week we have releases from the Confederation of British Industry. With both orders and sales expected to improve, the Pound could firm. 

Some speeches from Bank of England (BoE) officials, in particular Governor Andrew Bailey, could also cause some movement in the Pound. GBP investors will be looking for any hints of a rate hike at the bank’s meeting next month. 

Samuel Birnie

Contact Samuel Birnie