The Pound is down by -0.5% against the Australian Dollar today on news that UK manufacturing output is slowing by more than expected.
This drop in GBP demand may be reversed in the near-term, however, given that a key proposed amendment for the House of Lords Article 50 debates is set to be voted on.
The amendment requires the Government to secure the rights of EU citizens living in the UK after Brexit, something currently only ensured by Home Secretary Amber Rudd’s pledge to treat EU nationals with ‘utmost respect’.
If the amendment were approved for the bill and the Government obligated to keep the rights of EU citizens intact, then this could trigger a Pound Australian Dollar rally.
As well as the amendment ensuring that EU citizens would not be wrenched out of their current roles in the UK jobs market, the news could also make the impending Brexit negotiations easier.
If EU citizens aren’t faced with the threat of reduced rights or removals back to their home nations, then EU leaders could reciprocate the gesture by allowing the over a million-strong number of UK expats to remain in the EU.
The latest Australian Dollar gains against the Pound have come from GDP data, which has shown a sizable expansion in growth rates during Q4. Additional support has come from the fact that Australia has now avoided a recession for 25 years, in spite of the late 2000’s financial crisis.
Further Australian Dollar Pound gains may be triggered on the next action from the Reserve Bank of Australia (RBA), which is scheduled to make its next interest rate decision in early March.
The RBA previously left interest rates on hold at 1.5%, but signs that a rate hike is incoming could cause a rapid appreciation in the Australian Dollar’s value. Such an attitude may not be without its risks, however, as former National Australia Bank Chief Executive Don Argus points out;
‘There are too many shadows over the global economy – Brexit, the Italian banking system, uncertainty in the US — and Australians have the highest debt load in the world. [An Australian rate hike] would only add to people’s misery’.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was trending in the region of 1.61 and the Australian Dollar Pound (AUD GBP) exchange rate was trending in the region of 0.62.
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