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Pound Australian Dollar Exchange Rate Loses Ground as Brexit Uncertainty Persists

December 24, 2018 - Written by Frank Davies

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate failed to hold onto its one-month high at the start of the week, remaining under pressure thanks to UK politics.

As markets continue to weigh up the odds of a no-deal Brexit, with support for Theresa May’s proposal remaining limited, the mood towards the Pound soured.

With uncertainty looking set to persist for some weeks to come, ahead of the January parliamentary vote on the Withdrawal Agreement, support for GBP exchange rates proved rather slim.

However, a wider sense of market risk aversion also kept the Australian Dollar in check ahead of the Christmas break.

With the US government in a state of partial shutdown investor confidence was generally limited, keeping the GBP/AUD exchange rate on a narrow trend.

Australian Private Sector Credit Growth to Support Australian Dollar (AUD) Exchange Rates



Some support could be in store for the Australian Dollar ahead of the weekend, however, if November’s private sector credit data proves positive.

Any signs that point towards increased confidence within the Australian economy could offer AUD exchange rates a boost, in spite of general market worries.

Another solid month of growth in credit could give investors incentive to buy into the Australian Dollar, with an increase in credit availability suggesting a greater sense of domestic confidence.

However, any signs of weakness could easily drag AUD exchange rates lower across the board on Friday.

The Australian Dollar is also likely to see volatility in response to the latest US data, with stronger US results likely to put increased pressure on the commodity-correlated AUD.

GBP/AUD Exchange Rate Vulnerable to Weaker UK Mortgage Approvals



UK mortgage approvals data may weigh down the GBP/AUD exchange rate, meanwhile, as forecasts point towards a decline on the month.

A lower level of mortgage approvals would suggest that the domestic housing market remains in a weaker state of health, exacerbating concerns over the outlook of the wider economy.

If households continue to take a more cautious view in the face of Brexit-based uncertainty this is likely to encourage investors to sell out of the Pound.

Any uptick, on the other hand, could offer the GBP/AUD exchange rate a boost on Friday morning on the back of a stronger outlook for the sector.

As long as UK politics remain a source of concern for investors, though, the upside potential of the Pound looks set to remain rather limited.

Chinese Manufacturing Sector Weakness to Limit Australian Dollar (AUD) Exchange Rate Upside



The appeal of the risk-sensitive Australian Dollar could diminish on Monday, however, if the latest Chinese manufacturing PMI fails to show an improvement on the month.

After China’s manufacturing sector fell into a state of stagnation in November markets are hoping to see evidence of at least some degree of growth in the final month of 2018.

Further evidence of slowing economic growth in the world’s second largest economy, though, would leave AUD exchange rates exposed to fresh downside pressure.

As long as investors see cause for concern over the outlook of the global economy in the months ahead the mood towards the Australian Dollar is unlikely to see any significant improvement.
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