Growing unrest among Pound traders has led to a GBP/AUD slide on Tuesday’s trading session, pushing the pairing down to 1.6827.
There has been a steady stream of negative UK news recently, with the latest coming from Bank of England Governor Mark Carney.
Carney has given a pair of concerning statements, covering both interest rates and future Brexit deals.
On the one hand, Carney has failed to concretely state whether he supports a November interest rate hike, leaving economists in the dark about the odds of such an occurrence.
Other damage has been caused by Carney’s assertion that a ‘no deal’ Brexit would be highly damaging to the UK economy, despite the recent push for this from some high-ranking Conservatives.
(First published October 17th, 2017)
The Pound has made a marginal rise against the Australian Dollar recently, but remains subject to fluctuating attitudes about the ongoing Brexit process.
Brexit in Focus: Tensions High ahead of EU’s Brexit Summit
The coming Thursday and Friday may see the Pound slump against the Australian Dollar, because of key Brexit-related events.
Over the two days, EU officials will be meeting in Brussels to discuss how far the UK has progressed in Brexit talks.
If they conclude that the UK has made insufficient progress, as seems likely, the Pound could depreciate and slide against the Australian Dollar.
There are widespread concerns that UK officials have not done enough to solve issues like the Irish border, the rights of EU citizens in the UK and the most contentious problem – the amount paid by the UK as part of a ‘divorce settlement’.
Recent drafts from EU officials have suggested that an equally important recap will take place in December. According to a draft document for discussion by EU ministers;
‘In December, the European Council will reassess the state of progress in the negotiations with a view to determining whether sufficient progress has been achieved on each of the three above issues.
If so, it will adopt additional guidelines in relation to the framework for the future relationship and on possible transitional arrangements’.
If both the October and December summits turn out badly for the UK and see matters like trade and transition still off the table, the Pound could see a pair of sharp declines.
Australian Dollar could Weaken if RBA Holds Off on Interest Rate Hike
The next Australian Dollar-influencer will be further Reserve Bank of Australia (RBA) news.
The RBA’s minutes for October have come out recently and imply that the central bank will leave interest rates untouched for the foreseeable future.
The minutes imply that the bank sees current low interest rates as an actual beneficial factor for the AU economy, which means that they are unlikely to unsettle this with a rate hike or cut.
This is not a guaranteed outcome, however, as the minutes also warned that;
‘Low interest rates and low financial market volatility had promoted financial risk-taking’.
If the RBA gives no indication of a possible rate hike in the future, this could leave the Australian Dollar lagging against the Pound.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.6906 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5913.
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