Brexit Uncertainty Keeps Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate on Back Foot
Market anxiety over Brexit helped to drive the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate down as a resolution to the Irish border issue continues to elude negotiators.
While reports have suggested that the EU is willing to put forward an offer of a UK-wide customs union, something which could put the border issue to rest, this failed to boost Pound Sterling (GBP).
Investors remain doubtful of Theresa May’s ability to win support for any potential Brexit deal, leaving GBP exchange rates lacking in support.
As researchers at Deutsche Bank commented:
‘Our economists do not think that such an arrangement will be easy to get through parliament. If it covers the entire UK and is open-ended, the hard Brexiteer flank of the Conservative party will not be satisfied; if it is temporary and separates the UK and Northern Ireland in some way, the DUP will not be satisfied; and the EU is unlikely to support a deal that resolves these differences.’
The disappointing nature of September’s BBA mortgage approvals figure added to the bearish mood of the Pound on Wednesday morning.
Australian Dollar (AUD) Exchange Rates Under Pressure Thanks to Risk Aversion
General market jitters have continued to limit the potential of the Australian Dollar (AUD), meanwhile, as lingering geopolitical tensions and trade worries fuel risk aversion.
Without the support of any fresh domestic data AUD exchange rates have struggled to find any particular traction this week.
Even though the Trump administration launched a fresh attack on the monetary policy of the Federal Reserve this failed to encourage any Australian Dollar gains.
Investors still expect the Fed to raise interest rates once more before the end of the year in spite of the criticism, something which would widen the policy divergence between the US central bank and the Reserve Bank of Australia (RBA).
As RBA policymakers have demonstrated signs of greater caution over the economic outlook in recent days this has kept AUD exchange rates on a weaker footing.
Disappointing US data could still encourage the Australian Dollar to push higher ahead of the weekend, however, to the detriment of the GBP/AUD exchange rate.
Lack of Support for May’s Brexit Agreement to Weigh on Pound Sterling (GBP)
Brexit looks set to dominate the outlook of the Pound for some time to come as worries over the potential of the UK leaving the EU without a deal mount.
If Theresa May fails to convince the Conservative 1922 committee to support the proposed Brexit agreement this could see GBP exchange rates sliding to fresh multi-week lows.
Unless investors see reason to bet on an imminent breakthrough demand for the Pound is unlikely to pick up in the days ahead.
The Bank of England’s (BoE) November policy meeting is unlikely to offer the GBP/AUD exchange rate any particular support either.
As long as policymakers look set to leave interest rates on hold for the foreseeable future the potential for a Pound rally appears limited.