Pound to Australian Dollar Exchange Rate Losses Limited despite Brexit Fears
Despite this week’s news that UK Parliament will be suspended for most of September and half of October, the Pound to Australian Dollar (GBP/AUD) exchange rate is on track to see only limited losses throughout the week overall.
Since opening this week at the level of 1.8192, GBP/AUD has fluctuated between two month highs of 1.8357 and lows of 1.8019.
GBP/AUD has generally trended lower due to Brexit fears, and the pair currently trends near the level of 1.8120. This is around half a cent below the week’s opening levels.
The Pound (GBP) is avoiding deeper losses, but Brexit uncertainties still dominate the currency’s outlook. Meanwhile, Australian Dollar (AUD) investors await US-China trade developments and a slew of Australian news next week.
Pound (GBP) Exchange Rates Avoid Major Losses despite No-Deal Brexit Threat
The perceived chance of a no-deal Brexit has risen even further in the past week.
UK Prime Minister Boris Johnson successfully secured an extended prorogation of Parliament, from the 9th of September until the 14th of October.
The Queen’s Speech for his new government will take place on the 14th of October, but commentators have noted that the length of the parliamentary suspension is unusually long.
It has been perceived as an action that will limit UK Parliament attempts to prevent a no-deal Brexit from being forced through, and this has kept pressure on Sterling.
Some analysts noted that because Sterling had already fallen so far, its potential for further losses was limited. According to Ugo Lancioni, Managing Director of Global Fixed Income and Currency Management at Neuberger Berman:
‘Even if we fall into a no-deal Brexit, we could see a downside of about 5% from current levels but the upside could be more, especially if officials respond with a stimulus package to cushion the economic impact,’
Australian Dollar (AUD) Exchange Rates Struggle to Capitalise on Limited Trade Hopes
Despite yesterday’s fresh rise in US-China trade hopes, the Australian Dollar has failed to capitalise on the news.
China indicated it would not retaliate to the latest US trade tariffs and would instead seek de-escalation and resolution.
China is Australia’s biggest trade partner, so AUD investors were a bit more optimistic after China appeared to take a softer stance on the US-China trade war.
However, the Australian Dollar’s gains in response to the news were limited. Hopes for this to lead to a lasting improvement in trade tensions are still light, and other global geopolitical tensions continue to dampen risk sentiment as well.
Australia’s latest building permits report printed a shocking contraction of -9.7%, which certainly didn’t help the currency either.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Anticipates Brexit and RBA Developments
Next week could be a vital one for the Pound to Australian Dollar (GBP/AUD) exchange rate. Major Australian news and data is due throughout the week, and major UK political developments are expected.
The week’s major Australian data includes retail sales on Tuesday, Q2 growth rate data on Wednesday, and trade balance data on Thursday.
However, the biggest news of the week for AUD investors will likely be the Reserve Bank of Australia’s (RBA) September policy decision on Tuesday.
The bank is not expected to cut Australian interest rates at next week’s policy decision, but depending on the signals the bank shows it could be heavily influential for the ‘Aussie’.
As for the Pound, UK Parliament will briefly reconvene next week before the prorogue begins, so any potential legislation or confidence vote news could cause significant movement in the Pound to Australian Dollar (GBP/AUD) exchange rate.