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Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Could the BoE Cut Rates in the Event of a No-Deal Brexit?

Bank of England

GBP/AUD Exchange Rate Subdued BoE’s Dovish Shift

The Pound Australian Dollar (GBP/AUD) exchange rate is currently rangebound this morning, in the wake of the Bank of England’s latest rate decision.

At the time of writing the GBP/AUD exchange rate is currently trading at around AU$1.8330, leaving the pairing unchanged from this morning’s opening rate.

Pound (GBP) Upsides Limited as BoE to Cut Rates on No-Deal Brexit

While the Pound (GBP) may have put in a fairly strong performance this week, analysts suspect there may be little headroom for the currency to continue upwards, following the Bank of England’s policy decision yesterday.

While the BoE’s decision to leave interest rates on hold this month came as no surprise to markets, many GBP investors had been hoping that the bank would buck the recent trend for central banks to turn dovish, given that BoE Governor Mark Carney had previously suggested that markets are ‘underestimating’ the pace at which it would raise interest rates.

However this hawkish bias failed to materialise this month, with GBP investors disappointed to see that no members of the Monetary Policy Committee (MPC) broke rank to vote for a rate hike.

While the bank reiterated its stance that interest rates could move in either direction in the event of a no-deal Brexit, analysts were unconvinced, instead forecasting that in such an outcome the BoE could cut rates by up to 50 basis points.

With the risks of a no-deal Brexit appearing to be on the rise this is likely to cap demand for the Pound.

GBP/AUD Exchange Rate Forecast: UK Political Uncertainty to Temper Sterling Next Week?

Looking ahead to next week’s session, we expect to see the Pound Australian Dollar (GBP/AUD) exchange rate becoming increasingly politically sensitive, in the absence of any notable economic data.

For GBP investors the focus will turn back to the Conservative Leadership contest, with Sterling likely to show limiting movement as markets speculation on what a Boris Johnson or Jeremy Hunt premiership could mean for Brexit.

Meanwhile AUD investors will be paying close attention to trade rhetoric between the US and China in the lead up to the G20 Summit of leaders next weekend.

This could see the ‘Aussie’ appreciate if there is optimism that a meeting between Donald Trump and Xi Jinping could go some way towards resolving their trade dispute.