Pound to Australian Dollar Exchange Rate Fluctuates as Investors Anticipate Influential News
Overall this week, broad Brexit fears have dragged the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate lower. The Pound (GBP) did avoid its worst levels however, due to a lack of demand for the Australian Dollar (AUD).
Since opening this week at the level of 1.8347, GBP/AUD has trended with a downside bias. On Thursday, GBP/AUD hit a 3-week-low of 1.8092 before recovering slightly.
Overall though, GBP/AUD is on track to have lost over a cent throughout the week as the pair trends near the level of 1.8230 at the time of writing.
There is unlikely to be much more major movement in the Pound or Australian Dollar until next week’s key UK and Australian ecostats are published, unless there is a surprising development in the Brexit process.
In fact, the Pound is unlikely to strengthen much in general unless there is a significant agreement regarding UK-EU Brexit negotiations soon.
Pound (GBP) Exchange Rates See Broad Weakness on Brexit Fears
For most of this week, Brexit fears have dominated UK headlines and this has weighed heavily on the Pound’s appeal.
While UK Prime Minister Theresa May has seemingly avoided a leadership challenge for now, concerns remain that a worst-case scenario ‘no-deal Brexit’ could become reality.
UK-EU Brexit negotiations are still in deadlock regarding the persistent issue of Ireland’s border.
If no agreement on the border is reached within the next few weeks, the UK government has indicated it plans to begin preparing for that worst-case scenario ‘no-deal Brexit’.
The UK government’s confirmation that it could begin preparation for a ‘no-deal Brexit’ as soon as mid-November has made Pound investors highly anxious.
Analysts are confident that a deal can be reached even if it takes a little longer to achieve, but amid the deadlock in negotiations and the number of UK MPs willing to try blocking the deal even if it is made, there is little reason to buy the Pound.
Australian Dollar (AUD) Exchange Rates Weaken amid Low Risk-Sentiment
Despite the Pound’s broad weakness in recent sessions, GBP/AUD was able to recover from multi-week-lows at the end of the week due to the Australian Dollar’s own weakness.
A lack of supportive Australian data in recent sessions, as well as a strong US Dollar (USD) and mixed market demand for riskier trade-correlated currencies left investors with little reason to buy the Australian Dollar.
As the Australian Dollar is fairly risky, its gains this week have been limited to the brief surges in risk-sentiment. Risk-sentiment weakened again on Friday, so the Australian Dollar looks on track to end the week limp.
Australian Dollar investors are also likely awaiting next week’s key Australian ecostats before making any moves on the shared currency. Especially, according to Michael Workman from CBA, because the Reserve Bank of Australia (RBA) is still a ways off from hiking Australian interest rates:
‘The general picture will remain one of inflation tracking along the bottom end of the RBA’s target band,
That sort of outcome, against a background of solid economic activity data, will probably leave the RBA happy to say the next rate move is ‘up’. But also leave them signalling any move as some way off.’
Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Await Brexit News, Australian Inflation
While some notable UK data will be published over the next week and the UK Treasury will present its Autumn Budget, the Pound’s strength may remain limited until there is some kind of major development in Brexit negotiations.
UK-EU Brexit negotiations remain in deadlock, but if some kind of solid agreement is made on the issue of Ireland’s border this is most likely to give the Pound a solid boost in demand.
On the other hand, if there are no Brexit developments or negotiations look more likely to collapse altogether, the Pound to Australian Dollar (GBP/AUD) exchange rate could fall even lower.
The Pound may react slightly to Monday’s Autumn Budget, or Thursday’s Bank of England (BoE) policy decision. However, these events may simply play up the significance of Brexit uncertainties and may not offer the Pound any fresh support.
Next week’s Australian data may be notably more influential, with a slew of major Australian stats coming in on Wednesday and Thursday especially.
Wednesday will see the publication of Australia’s September new home sales stats, as well as Q3 Consumer Price Index (CPI) inflation rate data. Australian trade balance and manufacturing stats will be published on Thursday.
If these stats beat forecasts they could offer the Australian Dollar some more solid support. Failing that though, the Pound to Australian Dollar (GBP/AUD) exchange rate is expected to keep reacting to Brexit fears and shifts in risk-sentiment.