GBP/AUD Exchange Rate Drops as Theresa May Faces Opposition from all Directions
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate has fallen slightly today, hitting a low of AU$1.7648.
Data released this morning has shown that mortgage approvals in the United Kingdom for October has increased to 39,697 from 38,712 the month before, although ultimately this has failed to buoy Sterling with investors still fixated on Brexit news.
GBP/AUD Exchange Rate Volatile on No-Deal Brexit Possibility
Sunday saw British Prime Minister, Theresa May get her EU withdrawal deal passed by the European Commission.
Her next task is to spend the next few weeks trying to convince MPs in Parliament to back it.
Jean-Claude Juncker, head of the EC, said the withdrawal agreement was the ‘only’ possible deal, and that a no-deal Brexit would cause more volatility for Sterling.
News that Theresa May will challenge Labour leader Jeremy Corbyn to a debate over her Brexit deal have added to the market uncertainty surrounding Sterling, as he has consistently stated that his party will vote against her proposal.
Meanwhile in Australia, Reserve Bank of Australia head Philip Lowe gave a speech yesterday in which he discussed the prospect of cash becoming a ‘niche payment instrument’ and the disposal of the cheque system, as there are ‘high costs’ involved, although he states:
‘We have not reached that point yet, but it may not be too far away.’
GBP/AUD Exchange Rate Slumps despite Falling Australian Housing Figures
Australian house prices have been falling for the past year, with property prices in Sydney and Melbourne tumbling.
Prices in Melbourne have fallen 0.4% in the last week alone, extending the decline to 0.8% this month.
Prices in Sydney have been seen to drop 1.2% from last month, which is alarming for AUD traders, as around 40% of Australian homes, and 60% of the total housing wealth is located in the two cities.
This decrease in home prices is likely to cause a slowdown in household spending, with Business Insider’s David Scutt stating:
‘Given that housing is the largest store of wealth for many Australian families, and with construction the third-largest employer in Australia behind healthcare and retail, it’s not all that surprising that changes in home prices are influential on employment and household incomes, hence the ability for households to spend.’
GBP/AUD Exchange Rate Likely to Fall Further on Brexit Uncertainty
Australia is set to release its private capital expenditure for the third quarter on Thursday, and if the forecast is accurate, it is likely that AUD will continue to push back against the Pound.
Adding to this, a report carried out by the thinktank the National Institute for Social and Economic Research (NIESR) sees the UK economy becoming 4% smaller by 2030 if Theresa May’s deal is approved by Parliament compared to if the country had remained in the EU, will likely add further downside pressure to GBP/AUD.
Conservative MP, Jacob Rees-Mogg has stated that the country should not be ‘frightened’ of making more preparations for a no-deal Brexit, referring to scare stories coming from those that support the deal as ‘absurd’.
With Brexit uncertainty remaining in the spotlight, it seems the already growing resistance to Theresa May’s agreement is likely to cause the Pound to Australian Dollar (GBP/AUD) currency to remain volatile for the week ahead.