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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as Markets Focus on Middle East Tensions

Australian Dollar Currency Forecast

Pound Australian Dollar (GBP/AUD) Exchange Rate Slides on Weak Pound

A weak Pound (GBP) saw the Pound Sterling Australian Dollar (GBP/AUD) exchange rate slump today, with the pairing  currently trading around AU$1.8136.

The Australian Dollar (AUD) edged up against the Pound (GBP) despite an explosive drone attack on the Abqaiq oil processing facility in Saudi Arabia which disrupted the global oil supply on Saturday.

Yemen’s Iran-aligned Houthi group claimed responsibility for the attack, increasing fears for escalating conflict in the Middle East and adding to existing geopolitical tensions.

The risk-sensitive AUD consequently struggled in broader trade, only holding its ground against Sterling as UK politics and resurgent Brexit fears undermined the British currency.

Sterling (GBP) Slumps as PM to Reject ‘Extra Dither and Delay’

Sterling slumped against the Australian Dollar ahead of Monday’s meeting between Boris Johnson and European Commission President Jean-Claude Juncker as the British Prime Minister clarified his intention to reject a Brexit extension, stating he wants to “get this thing done”.

Foreign Secretary Dominic Raab said Johnson will not present a detailed blueprint for a deal as the meeting is still too early in the process, but said the British premier would instead emphasize his preference to leave the EU with a deal.

While any indication of a potential UK-EU deal should offer support to Sterling, Johnson’s apparent refusal to countenance any further delay to the Brexit deadline offset potential gains.

An anonymous Downing Street source noted:

‘Any further extension would be a huge mistake. It is not just a question of the extra dither and delay – it is also the additional long months of rancour and division, and all at huge expense.

‘This is why the PM will stress to Mr. Juncker that, while he wants to secure a deal, if no deal can be agreed by October 18 his policy is to leave without a deal on October 31 – and reject any delay offered by the EU.’

Australian Dollar (AUD) Rises despite Weakest Chinese Industrial Output in Nearly 18 Years

Monday’s Chinese industrial output data revealed China’s economic slowdown has deepened, with production at its weakest in 17 and a half years.

Trade tensions between the US and China have had a damaging effect on the country’s growth and softened domestic demand.

Both retail sales and investment gauges worsened, reinforcing views that the People’s Bank of China (PBC) will cut key interest rates for the first time in three years.

While the US and China are expected to resume face-to-face trade talks next month, investors remain skeptical that the two superpowers will reach a trade deal or even de-escalate tensions.

However, this could do little to stop the risk-sensitive ‘Aussie’ rising against Sterling as the market focus is now fixed on the Middle East.

Pound Australian Dollar (GBP/AUD) Outlook: Dovish RBA to Leave AUD Under Pressure?

Looking ahead to the start of Tuesday’s session, the Australian Dollar looks set to slide against Sterling following the release of the Aussie House Price Index.

If house prices continued to decline in the second quarter, ‘Aussie’ sentiment could slump.

Meanwhile, the Reserve Bank of Australia’s (RBA) meeting minutes could see the Australian Dollar fall further if the bank presents an overly dovish tone or suggests another rate cut for 2019.