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GBP AUD Exchange Rate Sees Slight Jump as Markets Become Risk Adverse

Pound Australian Dollar Currency Forecast

The GBP AUD exchange rate saw a slight uptick this morning after it hit a new three-year low yesterday. The pressure on the Australian Dollar (AUD) is largely caused by investors becoming dovish towards high-yield markets in the wake of the report that the European Central Bank (ECB) wishes to cut asset purchasing.

‘Brexit’ Worries Still likely to Hinder Pound Sterling

I would be hesitant to say that this morning’s GBP AUD upturn is a sign of a recovery however, as traders are likely to remain dovish towards the Pound as market sentiment remains negative over ‘Brexit’.

The substantial Pound Sterling (GBP) drop off recorded this week was caused by the recent announcement by UK Prime Minister Theresa May that she will trigger Article 50 of the Lisbon Treaty before the end of March 2017 has renewed fears surrounding ‘Brexit’ and the uncertainty that it will bring to the British economy.

There is increasing speculation that UK politicians are favouring a ‘hard Brexit’ stance in the impending negotiations that would see the government look to make a clean break with the European Union and its single market in order to gain greater controls over immigration. This is a major drag on the Pound as investors fear what will happen to the British economy once it is cut off from the continent.

However with the recent string of positive PMI releases, such as today’s healthy service sector PMI which beat forecasts of 52.2 to hit 52.6, the Pound may be able to create a strong base from which to mount a recovery.

Australian Dollar (AUD) to Reapply Pressure to Sterling (GBP)?

Despite a recent dip as traders became more risk adverse the Australian Dollar is likely to remain in a position of relative strength as trade prices remain high and domestic data for the week has been positive.

Reserve Bank of Australia Chief Philip Lowe announced just yesterday that the RBA had decided to hold interest rates at the current rate of 1.5% as policymakers are confident that the Australian economy has room to grow, and that inflation rates are on target. This confidence will also help to limit any drop in the ‘Aussie’.

Any further recovery in the GBP AUD exchange rate is likely to be tied closely to market sentiment over ‘Brexit’ which remains dour, and could be severely hindered by any reports that point towards a ‘hard Brexit’.

Current GBP EUR Exchange Rates

At the time of writing the GBP/AUD exchange rate was trending around 1.6714 and the AUD/GBP exchange rate was trending around 0.5985.

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