Pound Australian Dollar (GBP/AUD) Exchange Rate Rises despite Possible Low Business Investment in UK Post-Brexit
The Pound Australian Dollar (GBP/AUD) exchange rate has risen today and the pairing is currently trading at an inter-bank rate of AU$1.8540.
During his first speech since joining the Bank of England, Jonathan Haskel said that business investment will likely stay low for the next few years.
He also emphasised there will be uncertainty over what will happen to the UK economy after Brexit and this is unlikely to lift quickly.
Despite this, the GBP/AUD exchange rate continued to climb.
The central banker also spoke about the transition period, stating:
‘First, the transition period is itself uncertain. Why? The Withdrawal Agreement specifies that the transition period is a minimum of 21 months, during which trade is business-as-usual, but there might be an extension to four years.
‘It is conceivable that, like Article 50, the UK will require more time than the 21 months. Thus, it is possible there might be another round of negotiating and attendant uncertainty.’
Haskel also pointed out the uncertainties for businesses as he stated:
‘Second, to make long-term investments, an investor also needs […] to know the future trade relationship that we strike. That is far from certain. For business, the question of whether that is a customs union or free-trade area is vital since that gives more of a steer as to whether there will be relatively frictionless trade with the EU or not.’
Pound (GBP) Rises despite Brexit Tensions and UK-EU Impasse
This morning, the Australian Dollar (AUD) was able to make gains on Sterling (GBP) as Brexit anxieties weighed heavy on the pairing.
Reports surfaced suggesting that the UK and EU had not made a breakthrough in their discussions over the weekend.
An unnamed EU Official told Reuters:
‘May has boxed herself even deeper into a corner, it seems the second meaningful vote will go ahead on Tuesday but it also seems like it won’t be the last meaningful vote on this.
‘We really want to be over with it now. It’s not going anywhere so even an extension is unlikely to break the impasse. There is not much patience or good will left on our side.’
Weaker-than-forecast Chinese money growth data, and February’s Consumer Price Index likely weighed on the ‘Aussie’.
Pound Australian Dollar Outlook: Will the GBP/AUD Exchange Rate Slide on Increased Australian Home Loans?
Looking ahead to tomorrow’s session, January’s Australian home loans are forecast to rise by 1%, which could provide the Australian Dollar (AUD) with an upswing of support.
However, this is not likely to buoy the ‘Aussie’ by much as it would do little to offset the previous month’s contraction of 6.1%.
It seems likely Sterling (GBP) could come under pressure against the Australian Dollar following the release of January’s UK Manufacturing production figure.
Also due for release is the UK’s latest GDP figures, which could provide the Pound with support as GDP is predicted to rise by 0.2%.
Brexit is likely to continue to remain the main catalyst for movement in the pairing, as tomorrow will see the second ‘meaningful vote’ in Parliament.
If Prime Minister, Theresa May’s deal is rejected by MPs, the Pound Australian Dollar (GBP/AUD) exchange rate could plummet.