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Pound to Australian Dollar Exchange Rate Outlook Dampened by Fears of UK Recession and No-Deal Brexit

Pound to Australian Dollar Exchange Rate Fails to Hold Highs despite Bearish AUD Outlook

Following last week’s broad plummet, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has attempted to recover most of its losses this week. Despite the Australian Dollar’s (AUD) continued weakness though, the pair has been falling today.

Last week saw GBP/AUD plummet over two cents from 1.8434 to 1.8186, but has only recovered around a cent of those losses this week so far despite ‘Aussie’ weakness.

GBP/AUD touched on a high of 1.8396 yesterday, but at the time of writing today was trending nearer the level of 1.8295.

With both currency outlooks weak, the Pound (GBP) may struggle to advance again, but the Australian Dollar may lack the drive to push GBP/AUD back towards the week’s opening lows.

Pound (GBP) Exchange Rates Slide as Brexit News and Data Fail to Impress Markets

The Pound’s early week gains came as a result of hopes that Britain’s Boris Johnson government could still secure a softer Brexit deal, but those hopes appear to have been short-lived.

Brexit uncertainties and no-deal Brexit fears still cloud over the Pound outlook, mere weeks before the current Brexit date at the end of the month, due to mixed response to Johnson’s latest Brexit plan.

Johnson has proposed border checks in the Irish Sea rather than the Irish border, as an alternative to the controversial Irish backstop included in the first UK-EU deal.

However, EU sources and analysts have expressed doubt that the proposals will be enough to persuade the EU to drop the backstop from the deal.

As Johnson has said he will go ahead with a no-deal Brexit if his proposals are rejected, no-deal fears are keeping pressure on Sterling.

On top of this, the latest UK services data unexpectedly contracted, which has worsened speculation that Britain could fall into recession in Q3.

Australian Dollar (AUD) Exchange Rate Strength Limited by Poor Australian Data

The Australian Dollar has had a fairly bearish week overall, as the Reserve Bank of Australia (RBA) cut Australian interest rates and indicated that further easing was on the way, while the latest Australian ecostats also failed to impress.

Today’s Asian session saw the publication of Australia’s September services PMIs, which fell slightly short of expectations and printed slow growth of 51.5.

Australia’s August trade balance report was also underwhelming, with the trade surplus narrowing and exports unexpectedly falling -3%.

However, the Australian Dollar still advanced today. This was largely due to weaker performance in the US Dollar (USD), as well as flared up Federal Reserve interest rate cut speculation, following this week’s disappointing US data.

If the Federal Reserve ramps up monetary policy easing, the perceived policy divergence between the US and Australia will narrow, keeping the Australian Dollar appealing.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Await Australian Retail Sales

Rounding off a notable week for the Australian Dollar outlook, tomorrow’s Asian session will see the publication of Australia’s anticipated August retail sales results.

Australian retail sales are expected to have improved from -0.1% to 0.5%, but if they fall short of expectations concerns about Australia’s economic outlook could worsen and Reserve Bank of Australia (RBA) interest rate cut bets could rise.

Australian new home sales data from HIA may prove influential as well.

If these stats beat expectations, GBP/AUD may shed more of this week’s gain attempts, as the Pound lacks the support to hold its ground against stronger rivals.

Investors are also highly anticipating potential reactions from EU officials and UK Parliament over Boris Johnson’s Brexit plans, so the Pound to Australian Dollar (GBP/AUD) will remain focused on politics and Brexit as well.