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Article 50 Bill Vote Approaches, Pound Australian Dollar Exchange Rate Rises

February 1, 2017 - Written by Ben Hughes

As the Australian trade surplus was found to have widened further than expected in December the GBP AUD exchange rate slumped sharply, with confidence in the domestic economy improving.

However, the Pound could recover some ground against its rival if the Bank of England (BoE) proves to be more hawkish at its first policy meeting of 2017.

[Previously updated 01/02/2017]

Pound Sterling Weakened on Tuesday by House Debate of ‘Brexit Bill’

The Pound had a poor day of trading against the Australian Dollar during Tuesday’s session, both due to concerns about private debt but also due to high-profile debates about Brexit.

In the former case, while the Bank of England (BoE) consumer credit result for December showed a reduction in credit debt on the month, the figure still remained at an 8-year high.

The wider news was that MPs were taking sides on the Article 50 bill, which needs to be approved before the Government can trigger Article 50 and start Brexit properly.

Cases were made on both sides, but the concern that the bill may end up passing through Parliament unaltered lowered confidence in the Pound considerably.

Today’s UK ecostats have focused on the January manufacturing PMI, which has dropped as forecast.

Pound Predicted to Drop on Article 50 Bill Approval Today

The next major UK development is expected this evening, when MPs hold an actual vote on the Article 50 bill. Although a number of Labour and Scottish National Party (SNP) MPs are expected to vote against the bill, it is still predicted to be approved.

This will move the process on to its committee stage, during which time amendments may be voiced and potentially added to the bill; this is expected over Monday and Tuesday next week.

While this will not be a definitive sign that the Government can trigger Article 50 (yet), another step closer to Brexit in an official capacity is only likely to deepen investor concerns and cause the Pound to slide against the Australian Dollar.

Domestic data to watch out for on Thursday will include another freeze-forecast Bank of England (BoE) interest rate decision as well as the January construction PMI, which is expected to fall.

Australian Dollar Weakens as TPP Deal Remains Up in the Air

The most recent Australian news has shown a slump in the national manufacturing index for January, which has dropped from 55.4 to 51.2, a figure close to the contraction range below 50.

Other Australian news has been less negative; forecasts have been optimistic for future iron ore demand and prices, while the Trans-Pacific Partnership (TPP) trade deal remains in an uncertain but still active state following last week’s US withdrawal.

Australian Dollar Pound Exchange Rate Forecast to Rise if Trade Surplus Expansion Estimates Prove Accurate

The last Australian data day of the week, Thursday, is set to bring a number of high-impact AU announcements, starting with the early December trade balance figures. Previously, a 1.24bn surplus was posted and at present, forecasts have been for an even more supportive 2.2bn result.

Also out around the same time will be building permits stats for December; these are forecast to show a less-appealing drop on the month from 7% to -2%.

The last notable Australian data of the week is expected to be Thursday night’s AiG services index for January, which previously posted in the growth range at 57.7 points.

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