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Pound to Australian Dollar Exchange Rate Today: GBP/AUD Stages Recovery in Spite of Brexit Uncertainty

December 11, 2018 - Written by Frank Davies

After sustaining significant losses on Monday the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate staged a modest recovery once the initial bout of Brexit jitters eased.

Theresa May’s decision to postpone the parliamentary vote on Brexit in order to return to Brussels for further discussions with EU leaders still left the Pound under pressure, however.

While the decision avoided an embarrassing defeat in the House of Commons there is a risk that the prime minister will be unable to alter the deal.

This raised the odds of a no-deal Brexit once again, alongside a greater risk of a leadership challenge or general election.

Even so, the Pound found support on Tuesday morning after UK average weekly earnings unexpectedly picked up in the three months to October.

With UK wage growth accelerating investors found some cause for confidence in the domestic outlook, buying back into the weakened Pound in spite of Brexit anxieties.

Weakening Business Confidence Weighs on Australian Dollar (AUD) Exchange Rates

Confidence in the Australian Dollar, meanwhile, remained relatively muted in the wake of November’s NAB business confidence index.

As the index continued to trend lower this left AUD exchange rates on a weaker footing, even as the third quarter house price index showed a smaller contraction than forecast.

Worries remain over the outlook of the Australian economy as global growth comes under greater pressure, with trade tensions between the US and China still elevated.

With commodity prices under pressure the economy could struggle to gain much momentum in the months ahead, to the detriment of the Australian Dollar.

Even if the Westpac consumer confidence index shows an improvement overnight this may not be enough to boost AUD exchange rates, though.

Pound Sterling to Aussie Dollar (GBP/AUD) Exchange Rate Tipped to Remain Under Pressure From Political Uncertainty

Political developments are likely to keep the GBP/AUD exchange rate biased to the downside over the coming days, however.

Uncertainty over Brexit looks set to keep the Bank of England (BoE) from raising interest rates for some time to come, in spite of October’s improved wage growth.

Commenting on the latest UK wage data James Smith, Developed Markets Economist at ING, noted:

‘Rising wage growth is a key reason why we think the Bank of England’s preference is to raise rates again pretty soon, should a workable Brexit solution be found – although as the last few days have proven, that remains quite a big if.

‘Whichever way Brexit pans out, the one thing that looks more certain is that the Parliamentary vote may not happen until much further into the new year. For the economy, this greater uncertainty is likely to see an increased number of firms enacting contingency plans, or at the very least holding back on investment and hiring.

‘For these reasons, we think economic momentum will continue to stall as we move into 2019. The chances of a rate hike coming shortly after March are fading rapidly.’

If the UK economy shows further signs of weakness this could see the GBP/AUD exchange rate extending its recent slump and heading back towards its recent multi-month lows.

RBA Bulletin to Provoke Volatility in Australian Dollar (AUD) Exchange Rates

The latest Reserve Bank of Australia (RBA) Bulletin could provoke fresh volatility for the Australian Dollar this week.

If the report highlights a greater sense of optimism regarding the domestic outlook the mood of AUD exchange rates may improve.

Although the RBA is expected to leave interest rates on hold for the foreseeable future any signs of greater confidence in the economy could still shore up the Australian Dollar.

On the other hand, evidence of caution and softening growth momentum could give the GBP/AUD exchange rate a leg up.

As long as worries over US-China relations persist, meanwhile, a sense of risk aversion is likely to keep the Australian Dollar under a degree of pressure.
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