Pound to Australian Dollar Rising Despite Persisting No-Deal Brexit Fears
Despite rising bets that a no-deal Brexit could become possible under a likely Boris Johnson leadership, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been climbing again this morning due to the latest Reserve Bank of Australia (RBA) news.
Weakness in the Australian Dollar (AUD) has made it easier for the unappealing Pound (GBP) to advance recently, with GBP/AUD surging from 1.8200 to 1.8321 last week and largely holding its ground this week so far.
GBP/AUD has been fluctuating in a relatively tight region since markets opened yesterday, but the pair was edging higher and trended in the region of 1.8345 at the time of writing today.
Demand for the Pound was weak amid Brexit and political uncertainties, but the Australian Dollar was seeing broad losses in response to signs that the RBA was likely to cut interest rates again within the foreseeable future.
Pound (GBP) Exchange Rates Unappealing as No-Deal Brexit Fears Rise
The returning possibility of a worst-case scenario no-deal Brexit was among the primary causes of the Pound’s bearish slump last month. Continued fear over how Brexit will unfold is still keeping the British currency from climbing much.
As Britain’s Conservative Party leadership contest heats up, with a second round of voting expected today, it is still widely expected that Brexiteer Boris Johnson will be the clear frontrunner.
Johnson’s popularity in the contest is part of the Pound’s recent weakness, despite it also meaning lesser uncertainty.
This is because Johnson has advocated for a harder Brexit over the past few years, and he continues to argue that Britain should leave the EU in October even if it does not have a deal.
Overall the Pound’s movement lacks direction though, which has made it easier for the British currency to climb versus a tumbling ‘Aussie’.
Australian Dollar (AUD) Exchange Rates Tumbles on Reserve Bank of Australia News
During today’s Asian session, the Reserve Bank of Australia (RBA) published its latest meeting minutes report.
While the bank appeared to take a cautiously neutral stance at its last policy decision, cutting rates while stopping short of signalling more cuts, the bank’s meeting minutes indicated that more rate cuts were indeed likely.
The meeting minutes were among the most dovish assessments from the bank in recent years, with the bank’s admission that wages were unlikely to rise without further stimulus. The report said:
‘Given the amount of spare capacity in the labour market and the economy more broadly, members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead’
The Australian Dollar also failed to get any support from the latest Australian data, as Q1 house price index figures contracted more than expected.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Awaits More Central Bank News
The Reserve Bank of Australia (RBA) meeting minutes were influential, but there may be even larger movements ahead for the Pound to Australian Dollar (GBP/AUD) exchange rate in the coming days as more Central Bank news is anticipated.
Perhaps the biggest event of the week for Australian Dollar investors will be the Federal Reserve’s June policy decision on Wednesday, when markets expect the Fed will signal how dovish it plans to go on US monetary policy plans.
No interest rate cut is expected yet, but with the RBA set to cut Australian interest rates lower, the Australian Dollar would see stronger demand if the Fed took a notably dovish stance.
A Thursday speech from RBA Governor Philip Lowe could influence the Australian Dollar as well, depending on the tone it takes.
As for the Pound, while Thursday’s Bank of England (BoE) policy decision could prove influential, the ongoing Conservative Party leadership contest is more likely to influence the Pound outlook and the Pound to Australian Dollar (GBP/AUD) exchange rate.