Pound to Australian Dollar Exchange Rate Throttled by Brexit Fears despite RBA Bets
Despite the Australian Dollar’s (AUD) weakness on Reserve Bank of Australia (RBA) interest rate cut bets over the past week, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has already shed all of last week’s gains and plummeted even lower on Brexit fears.
GBP/AUD saw solid gains from 1.7758 to 1.7912 on RBA rate cut bets last week, but since opening this week the pair has shed over two and a half cents already, giving up all of those gains and more.
During the Asian session, GBP/AUD touched on a fresh 2019 low of 1.7574. GBP/AUD has since rebounded slightly and trends closer to the level of 1.7626 at the time of writing – still well below last week’s levels.
Upcoming Australian inflation rate data is unlikely to dissuade market RBA rate cut bets, but the Pound (GBP) is still the most unappealing currency overall as Britain’s new Boris Johnson government causes bets of a no-deal Brexit to worsen.
Pound (GBP) Exchange Rates Throttled by No-Deal Brexit Fears
Following last week’s brief recovery in the Pound (GBP) amid the changeover in Britain’s government, the British currency has plummeted again this week.
When markets opened yesterday, the Pound began to be sold as investors reacted to weekend comments from UK government officials.
Some attempts from new UK Prime Minister Boris Johnson to damage control the comments yesterday gave no notable support to Sterling, as the Pound’s selloff gained apace and ultimately saw significant losses throughout the day.
According to Kit Juckes, Chief Foreign Exchange Strategist at Societe Generale:
‘Ultimately, May failed to convince anyone that no-deal was ever an option, despite repeated warnings that it was better than a bad deal. Boris Johnson is determined not to make the same mistake and it now remains to be seen whether the EU will take his threats as seriously as the market is. Traders are currently not optimistic but it’s still early days. For now, the currency may remain under severe pressure.’
The Pound remained unappealing today, its rebound from its worst levels highly limited amid a lack of reasons to buy the currency.
Australian Dollar (AUD) Exchange Rates Steadier Ahead of Anticipated Inflation Report
The Australian Dollar remains fairly unappealing after last week’s selloff, as markets become more convinced that the Reserve Bank of Australia (RBA) could cut Australian interest rates more than once before the end of the year.
Initially, investors had been expecting one more rate cut from the RBA in the coming months. However, recent data and comments from analysts and bank officials have caused rate cut bets to rise, which has weakened the ‘Aussie’.
Expectations for a more dovish RBA have dominated AUD movement, but anticipation for tomorrow’s upcoming Australian inflation rate data has caused steadier movement this week so far.
Australian inflation is forecast to have improved in Q2 2019, but analysts doubt that the RBA will be dissuaded from its dovish path even if inflation rises – so the ‘Aussie’ remains under pressure.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook to be driven by Australian Inflation
As the Pound to Australian Dollar (GBP/AUD) exchange rate continues to be held near its worst levels due to no-deal Brexit fears, the Australian Dollar’s lack of appeal means the pair may have even further to fall if that changes.
Australian Dollar investors are hesitant to buy the currency, but the ‘Aussie’ could climb if tomorrow’s anticipated Australian inflation report beats expectations.
Australian inflation is expected to have improved in Q2. While it won’t cause investors to drop Reserve Bank of Australia (RBA) interest rate cut bets, some stronger than expected data could still cause speculation of a less dovish than feared RBA.
Of course the opposite is also true. RBA interest rate cut bets would rise and the Australian Dollar could weaken if the inflation data disappoints.
Other Australian data to keep an eye out for in the coming days includes manufacturing PMI data on Thursday, and the key retail sales report on Friday.
As for the Pound, Brexit developments will keep dominating movement. However, Thursday’s Bank of England (BoE) policy decision could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate if it surprises investors.