The Pound has recently appreciated by 0.7% against the Australian Dollar, ahead of a potentially significant event in the Brexit process.
Pound Sterling Prediction: Will GBP Advance on Brexit Flexibility?
Prime Minister Theresa May will be giving a key speech on Brexit today, which could have significant implications for future Pound movement.
The PM is expected to state that she wants a Brexit deal that benefits the UK and EU, although an additional push for a trade deal is also expected to be made.
May’s speech is expected to include a request for ‘leadership and flexibility’ from the EU, although this could prove controversial.
This is because this request is predicted to be about a possible trade deal – May could be asking EU leaders to begin discussing a post-Brexit trade deal ahead of schedule.
The issue of trade has consistently been ignored by EU officials, who have instead attempted to solve other issues first.
These have included key matters like the Irish border, a UK-sourced exit bill and the rights of EU citizens living in the UK.
In the event that EU officials do move onto discussing trade before resolving these other matters, the Pound could appreciate sharply.
On the other hand, if May’s pressing of the issue backfires and EU officials reject the calls then a GBP AUD slide could take place.
Surprise RBA Interest Rate Cut could Trigger AUD Crash
The Australian Dollar may be in for heavy losses in the future, depending on the actions of Reserve Bank of Australia (RBA) policymakers.
The key issue is interest rates – the last action in this area was for the RBA to cut rates from 1.75% to 1.50%, back in August 2016.
Since then, there has been growing optimism that the next rate decision could be for a hike, although another cut is not out of the question.
Recent remarks from RBA official Ian Harper have raised concerns about a rate cut – Harper has said;
‘The thing that is causing an issue for us (the RBA board) is slow growth in wages, which is feeding into slow growth in household income. If you start to lose that momentum, that might be the basis of some sort of policy action’.
While not explicitly backing a near-term rate cut, Harper has stressed that;
‘You wouldn’t want to be jumping the gun and tightening too quickly’.
In the event that RBA officials do back a cut in national interest rates, the Australian Dollar could drop sharply against the Pound.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.6904 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8945.