Home » GBP » GBP to AUD » Pound Australian Dollar (GBP/AUD) Exchange Rate Drops to 7-Week Low as UK Risks Breaching International Law

Pound Australian Dollar (GBP/AUD) Exchange Rate Drops to 7-Week Low as UK Risks Breaching International Law

Australian Dollar Currency Forecast

Escalating Fears of No-Deal Brexit Scenario Drive Pound Australian Dollar (GBP/AUD) Exchange Rate Lower

Deepening worries over Brexit and the UK government’s plans extended the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate’s downtrend, pushing the pairing to a seven-week low.

After a government official admitted the plans to break international law and backtrack on the commitments made in the withdrawal agreement Pound Sterling (GBP) slumped sharply.

The news further inflamed relations between the two sides, raising the risk of talks collapsing without any deal being reached.

With a reversion to World Trade Organisation (WTO) terms looking increasingly likely investors saw little reason to support GBP exchange rates at this stage.

While the possibility for progress towards a deal remains, with just five weeks left before the negotiating deadline the risk of a hard Brexit looks set to keep the Pound under pressure.

Rebounding Consumer Confidence Lifts Australian Dollar Appeal

Demand for the Australian Dollar (AUD) picked up sharply, meanwhile, on the back of an unexpectedly improved Westpac consumer confidence index.

As forecasts had pointed towards a slight dip in sentiment on the month AUD exchange rates were encouraged as the index instead picked up from 79.5 to 93.8.

This suggests that Australian consumers are taking a more optimistic view in September, improving the chances of economic activity strengthening further in the third quarter.

Hopes of progress towards a recovery from at least some of the impact of the Covid-19 crisis shored up AUD exchange rates, in spite of lingering worries over the health of the global economy.

With fresh Australian data releases thin on the ground in the days ahead, though, the Australian Dollar could struggle to hold onto this positive footing.

Another bounce in US Dollar (USD) buying may drag on AUD exchange rates, with any uptick in safe-haven demand reducing the appeal of the risk-sensitive antipodean currency.

Soft August Gross Domestic Product Reading Set to Weigh on GBP Exchange Rates

Friday’s raft of UK data could see the GBP/AUD exchange rate come under renewed pressure as investors look for signs of recovery from the Covid-19 crisis.

With the NIESR monthly gross domestic product tracker expected to show another sharp contraction in growth on the month the mood towards the Pound is unlikely to improve.

Evidence that the economy started the third quarter on a weak footing would limit the odds of growth returning to positive territory in the near term, especially in the face of Brexit-based uncertainty.

On the other hand, forecasts point towards another positive month for both industrial and manufacturing production in July.

Signs of sustained growth within the manufacturing sector could encourage investors to take a more optimistic view, at least in the short term.

However, even if the UK economy can demonstrate resilience the GBP/AUD exchange rate will still remain vulnerable to any fresh bout of Brexit anxiety.