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GBP AUD Exchange Rate Recovers from Five-Month, But Will Brexit Jitters Send it Reeling Again?

Theresa May Press Conference

The Pound Australian Dollar (GBP AUD) exchange rate recovered from a five-month low late last week following a turbulent week of political and economic news.

The rally follows the Bank of England’s (BoE) latest policy meeting in which a member of the Monetary Policy Committee (MPC) broke ranks and voted to raise rates in March.

While the MPC ultimately voted 8-1 to leave rates unchanged, the dissent by outgoing policy maker Kristin Forbes prompted Sterling sentiment to skyrocket as investors speculated on the possibility of the BoE tightening monetary policy earlier than expected.

The jump helped GBP AUD to recover after slumping earlier in the week as parliament voted to pass the government’s Brexit bill, granting Theresa May the authority to trigger Article 50 and begin the process for leaving the EU.

With the PM planning to officially kick start Brexit by the end of March the Pound is highly likely to struggle over the coming weeks as analysts predict that markets are still yet to fully price in the fallout that will be caused by two years of uncertainty during negotiations.

Meanwhile the Australian Dollar was undermined on Thursday by an unexpected rise in domestic unemployment as the jobless rate jumped from 5.7% to 5.9% in February, its worse levels for over twelve months.

The fall is likely to set back any possibility of a rate hike from the Reserve Bank of Australia (RBA) later this year as a weakening labour market indicates that economic growth may not be as robust as recent data suggested.

Looking ahead to data releases this week GBP AUD may advance on Tuesday following the latest UK CPI data as the inflation rate is expected to climb from 1.8% to 2.1% in February, strengthening calls for the BoE to hike interest rates.

Sterling is also likely to appreciate if UK data shows that Retail Sales finally recovered in February following three consecutive months of contractions.

Meanwhile the ‘Aussie’ may suffer next week if the release of the minutes from RBA’s recent policy meeting reveals that the bank may adopt a dovish approach to future rate decision.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.60 and the AUD GBP exchange rate was trending around 0.62.