Pound to Australian Dollar Exchange Rate Continues Advances amid Market Risk-Aversion
The Australian Dollar (AUD) outlook continued to worsen, and the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continued to advance. Investors are buying the Pound (GBP) on persisting Brexit hopes, despite tough stances shown by UK officials.
Over the past week, GBP/AUD has seen impressive gains. Last week, GBP/AUD jumped from 1.8000 by over two cents, closing at 1.8240.
This week, GBP/AUD has only continued to advance. This morning, GBP/AUD touched on a high of 1.8426 – the best level for the pair since May.
While GBP/AUD has been unable to hold this high, it still trends relatively closely in the region of 1.8400 at the time of writing.
The ‘Aussie’ is falling, but the Pound outlook is filled with uncertainties as well. The British currency could easily tumble if UK-EU Brexit negotiations really do collapse.
Pound (GBP) Exchange Rates Still Holding Out Hope for Brexit Deal
Investors are hesitant to move too much on the Pound this week, as UK-EU relations appear on the brink of collapse.
Since last week, the UK government has been saying that it considers UK-EU Brexit negotiations to essentially be over. The government has indicated it does not see the point in further talks unless the EU softens its positions on some conditions.
Despite this and rising no-deal Brexit fears though, the Pound has actually been fairly resilient.
According to Lee Hardman, Currency Analyst at MUFG:
‘the developments are unlikely to materially alter market expectations that a trade deal remains the most likely scenario despite recent turbulence which is helping to dampen pound weakness,’
Australian Dollar (AUD) Exchange Rate Tumbling as Reserve Bank of Australia (RBA) Easing Bets Rise
The Australian Dollar is a currency often correlated with market risk and trade sentiment. As a result, it has been hit by surging global coronavirus fears in recent weeks, weakening it after months of strong performance.
Also key to the Australian Dollar’s losses has been a fresh rise in expectations that the Reserve Bank of Australia (RBA) will ease Australia’s monetary policy soon. The RBA is expected to finally introduce quantitative easing (QE) schemes.
Rising expectations for lower RBA rates and QE have left the ‘Aussie’ outlook at its lowest levels in half a year. RBA Deputy Governor Chris Kent continued to signal today that easing was likely.
For now, RBA bets and market risk-aversion are keeping the Australian Dollar weak.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook to be Dominated by Politics
There is potential for the Pound outlook to see a huge shift in the coming sessions, depending on how UK-EU relations develop.
If there is progress in UK-EU negotiations despite the UK government’s tough stance, the Pound outlook is likely to rise on Brexit deal hopes.
On the other hand though, further signs that negotiations are collapsing would cause more no-deal Brexit bets and the Pound outlook would considerably worsen.
The Australian Dollar’s movement will remain influenced by global market sentiment. The coronavirus pandemic and US political developments could cause risk-aversion if uncertainties rise. This would lead to AUD losses.
Of course, Reserve Bank of Australia (RBA) bets will remain a focus for AUD as well.
Towards the end of the week, UK and Australian PMI projections could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate.