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GBP/AUD Outlook: Pound Slips vs Aussie Dollar as Brexit Tensions and Public Borrowing Figures Leave Sterling Weakened

November 21, 2018 - Written by David Woodsmith

Pound Australian Dollar (GBP/AUD) Exchange Rate Hit after Public Borrowing Figures Highest in Three Years

The Pound Australian Dollar (GBP/AUD) exchange rate took a hit today after worse-than-expected UK public sector borrowing figures were published by the Office for National Statistics.

Today UK Prime Minister Theresa May is due to meet European Commission President Jean-Claude Juncker to discuss the Brexit deal ahead of Sunday’s important EU summit, which will determine the outcome of the UK-EU deal.

Meanwhile the Australian Dollar (AUD) remains victim to skittish investors, as US-China trade tensions once again flared up, sending the risk-averse ‘Aussie’ into a slump.

GBP/AUD Exchange Rate Volatile as May Faces Friction from Spain during Today’s UK-EU Negotiations

The Pound Australian Dollar (GBP/AUD) exchange rate slumped this morning with news from the ONS that public sector borrowing in October had reached £8.8bn, £1.6bn more than October 2017 hitting a three-year high.
Samuel Tombs, chief economist at Pantheon Macroeconomics, commented:

‘Hefty public borrowing in October has brought the run of good news on the public finances to an abrupt end, though it’s too soon to conclude that the Chancellor [Philip Hammond] is set to miss the forecasts laid out in last month’s Budget.’

However, amidst increasing Brexit tensions – domestically as well as in Europe – Theresa May found some support from the German chancellor, Angela Merkel, who said ‘I can say for Germany that we will agree to this exit agreement.’

This came after concerns from Spain, Ireland and Cyprus took issue with the Brexit deal, with the Spanish Prime Minister Pedro Sánchez airing his concerns over Gibraltar and saying that ‘Spain will vote no on Brexit.’

As the Pound Australian Dollar (GBP/AUD) exchange rate remains sensitive to Brexit issues, any votes of no-confidence are likely to cause more Sterling volatility.

Australian Dollar Pound (AUD/GBP) Claws Back Some Ground despite US-China Trade Tension Flare-Up

The Australian Dollar Pound (AUD/GBP) exchange rate mad up some lost ground despite renewed trade tensions worrying ‘Aussie’ investors.

Comments from US Trade Representative Robert Lighthizer yesterday reignited the US-China trade spat by saying that ‘China has not fundamentally altered its unfair, unreasonable, and market-distorting practices.’

Investors had further reason to be anxious over the ‘Aussie’, as Lighthizer’s comments were on the back of recent investigations into Beijing’s intellectual property and technology transfer practices, while a top Chinese diplomat hit back with a veiled threat against Washington, commenting on US protectionism thwarting the Asia-Pacific Economic Cooperation consensus.

In the absence of any significant Australian data, the ‘Aussie’ is likely to be dictated by market risk appetite with the AUD/GBP exchange rate affected by any further trade tension flare-ups.

Pound Australian Dollar (GBP/AUD) Exchange Rate Steady ahead of Sunday’s Brexit Summit Judgement as UK Faces Crucial EU Deal Breaker

The Pound Australian Dollar (GBP/AUD) exchange rate could see some strong movement following Sunday summit, where European and UK leaders will meet to seal the Brexit deal.

The Pound (GBP) is likely to see marked movement depending on the outcome of the summit, affecting GBP/AUD significantly if a deal agreed upon – or not.

Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate could have a quiet rest of the week, with any movement likely to be driven by political and trade considerations rather than data releases, of which there is nothing significant on the calendar.

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