Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as PM Reveals Brexit Proposals
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate edged up and the pairing is currently trading at around AU$1.8359.
On Wednesday afternoon, the government published its Brexit proposals which included plans to replace the Irish backstop.
Prime Minister Boris Johnson made his final offer to the European Union and stated that unless the bloc was willing to compromise the UK would leave the EU without a deal.
In his speech at the Conservative Party convention, the Prime Minister stated:
‘We are tabling what I believe are constructive and responsible proposals which provide a compromise for both sides. Let us be in no doubt that the alternative is no deal.’
However, many fear that the country is headed towards a no-deal or further delay as the proposals are not enough to get an agreement by the end of October.
Despite this, the Pound was able to edge up against the ‘Aussie’ likely due to the Prime Minister’s plans avoiding a hard Irish border.
Sterling (GBP) Rises despite Disappointing Construction Activity
On Wednesday morning data revealed that construction activity plummeted at the second-fastest pace in over a decade.
The sector was left stuck in a downturn at the end of the third quarter as the PMI declined from 45 to 43.3 in September.
Commenting on the data, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock stated:
‘The construction sector offered another devastating result in September with the second fastest fall in new orders since March 2009 and the financial crisis. After a relentless six-month decline in order books driven by Brexit uncertainty and political indecision, this is hardly surprising.
‘Looking ahead the signs do not look positive. Even a moderation in input prices since March 2019 and some moderate improvement in supply chain pressures will not be enough to keep the wolf from the door as no-deal looms and businesses remain Brexit unsteady.’
Australian Dollar (AUD) Slides as RBA Cut Rates to Record-Low
The Australian Dollar remained under pressure this week following the Reserve Bank of Australia’s (RBA) decision to slash rates for the third time this year.
The bank cut rates to a fresh all-time low of 0.75% and in a statement accompanying the decision the RBA noted that more work needed to be done to support the economy.
Following the decision, RBA Governor Philip Lowe stated in a speech that further cuts were inevitable, weighing on the ‘Aussie’.
In his speech, Lowe stated that central banks were being forced to respond to slowing global growth, and said:
‘Globally, the main issue at the moment is uncertainty generated by a series of geopolitical events, particularly the US-China disputes over trade and technology.’
Lowe also called on government and business to help stop the decline in growth, and stated:
‘We will all be better off if businesses have the confidence to expand, invest, innovate and hire people.
‘The key to a return to more normal interest rates globally is addressing the factors that are leading to the low appetite to invest […] This is mainly a task for governments and businesses, not for central banks.’
Pound Australian Dollar Outlook: Will Disappointing UK Services Growth Weigh on GBP?
Looking ahead, the Australian Dollar (AUD) could rise against Sterling (GBP) following the release of CommBank’s PMI composite.
If September’s PMI composite claws its way out of contraction, the ‘Aussie’ is likely to rally.
Meanwhile, the Pound is likely to slide following the release of the UK services PMI.
If the services sector edges close to stagnation in September, and the outlook looks dire, the Pound Australian Dollar (GBP/AUD) exchange rate is likely to slump.