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GBP AUD Exchange Rate Continues to be Inhibited by Brexit Impasse   

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The outlook for the Pound Australian Dollar (GBP AUD) exchange rate remains inhibited by the spectre of failing Brexit negotiations and recent disappointing UK data releases.

GBP AUD Exchange Rate Steadies as Australian GDP Misses its Mark

Australia’s economy grew at a 0.6% during the September quarter of 2017, all in spite of the support of public infrastructure and private business investment growth.

This followed the previous quarter’s upwardly revised 0.9% growth, missing the market consensus of 0.7%.

These figures predominantly resulted from disappointing growth in domestic demand and foreign trade, both of which negated any positive development from non-dwelling construction and inventory changes.

Year-on-year, Australia’s economy expanded at a rate of 2.8% in Q3, much faster than the previous period’s 1.8% but below the 3% expansion expected.

This ultimately left the ‘Aussie’ Dollar on poorer form, despite yesterday’s positive retail sales figures and the upbeat outlook from the Reserve Bank of Australia (RBA) Governor Philip Lowe.

Despite the drop, however, GBP AUD remained ever so slightly in the ‘Aussie’ Dollar’s favour.

May Faced with Possibility of Revolt over ‘Soft’ Brexit, GBP Exchange Rate Outlook Limited

After Monday’s 11th hour collapse of the Brexit agreement talks the pressure is now mounting for UK Prime Minister Theresa May to secure a breakthrough in negotiations.

But at what cost? Many within her party are asking, with prominent Brexiteers like Boris Johnson and Michael Gove upset that the PM agreed to surreptitiously push regulatory alignment between Ireland and Ulster without first briefing senior ministers.

The Irish Democratic Unionist party has also expressed shock at the handing of the Irish border problem, with May and her team not informing the DUP in advance about Downing Street’s plans to give Northern Ireland to the EU in exchange for progress onto the next stage of negotiations.

Beyond this, Brexit Secretary David Davis has asserted that any alignment with the north and south in Ireland would then apply to the rest of the UK, an eventuality that would perceivably leave Britain tied to the EU.

A cabinet source similarly surmised:

‘It seems that either Northern Ireland is splitting from the rest of the UK or we are headed for high alignment with the EU, which certainly hasn’t been agreed by Cabinet. The Prime Minister is playing a risky game’.

Markets are ultimately concerned, however, that a lack of progress will continue to delay trade talks and push the UK further towards a quagmire of uncertainty, thus dragging on business investment and potentially limiting the UK’s economic growth.

The GBP AUD exchange rate has remained bearish as a result.

Notable Ecostats on the Horizon for GBP AUD

The GBP AUD exchange rate could become increasingly volatile this evening and in the day ahead depending on the result of Australian data prints.

The ‘Aussie’ AiG performance of construction index is due for release this evening and Australia’s trade balance is due tomorrow, with Australia’s trade surplus expected to sink from A$1745m to A$1400m.

If this does occur then the Pound may find some purchase, but it is unlikely to be significant with markets predominantly focused on the ups and downs of the Brexit negotiations.

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