On Monday’s afternoon session, the Pound has slipped against the Australian Dollar to a lower exchange rate of 1.6473.
Recent economic news from the UK has been pessimistic, focusing on falling consumer spending. According to an IHS Markit and Visa-sourced report, consumer spending fell -0.8% year-on-year in July. Summing up the situation was IHS economist Annabel Fiddes;
‘Alongside the renewed squeeze on household budgets, uncertainties linger over the direction of the economy’.
(First published 10:56, August 7th, 2017)
With Brexit talks continuing to drag on, the chance remains for a Pound to Australian Dollar surge on a breakthrough in negotiations.
Pound Predictions: Normalisation of Brexit Talks could Extend GBP AUD Gains
Sterling has advanced to a rate of 1.6502 against the Australian Dollar recently, but remains vulnerable to any surprise news concerning ongoing Brexit talks.
The latest news on this front has been relatively negative. With the second round of talks underway, former Foreign Office official Sir Simon Fraser has criticised the UK’s progress so far. Speaking on BBC Radio 4, Fraser said;
‘The negotiations have only just begun, I don’t think they have begun particularly promisingly, frankly, on the British side.
We haven’t put forward a lot because, as we know, there are differences within the cabinet about the sort of Brexit that we are heading for and until those differences are further resolved I think it’s very difficult for us to have a clear position.
I think so far we haven’t put much on the table apart from something on the status of nationals, so we are a bit absent from the formal negotiation’.
If these current sticking points can be resolved in the future, the Pound could make a short-term rally against the Australian Dollar.
Australian Dollar Advance Possible if US Dollar Strengthens
The Australian Dollar has dipped by -0.4% against the Pound recently, in spite of a surge in national construction activity.
This decline has been caused by US news, where a rise in the reported number of jobs led to a brief US Dollar surge.
Looking ahead, the Australian Dollar could regain its footing on future US news, but in an unusual way.
To set the scene, Reserve Bank of Australia (RBA) policymakers have recently been blaming the strength of the Australian Dollar for slow economic growth.
This situation would be remedied by the AUD being devalued, which sometimes happens when the US Dollar rises in value.
Upsetting RBA hopes, however, the US Dollar has instead fallen recently, posting an over-two year low against the Euro among other peers. In the words of RBA Governor Philip Lowe;
‘If the US continues on the path of raising interest rates then I would expect that to put some upward pressure on the US dollar and, by implication, downward pressure on the Australian dollar. We have been hoping for that for some time’.
As it stands, however, the Australian Dollar shows no signs of easing off, which means that the Australian economy could continue to suffer. According to RBA policymakers;
‘It’s possible the Australian dollar could appreciate further, which, if sustained, would be expected to result in a slower pick-up in economic activity and inflation’.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.6501 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.6059.
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