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GBP/AUD Outlook - Sterling Exchange Rates Bolstered by Brexit Hopes While ?Aussie? Dragged by Poor Australian Data

January 16, 2019 - Written by David Woodsmith

Investors briefly sold the British Pound to Australian Dollar (GBP/AUD) exchange rate last night, but the pair ultimately became more appealing even though the UK government suffered a historic loss on its negotiated UK-EU Brexit plan. Poor Australian data made it easier for the Pound to advance during Wednesday’s European session.

Since opening this week at the level of 1.7790, GBP/AUD has been trending with an upside bias as disappointing Chinese data and a slightly stronger US Dollar (USD) left the Australian Dollar unappealing. GBP/AUD briefly slumped to a weekly low of 1.7680 yesterday evening, before rebounding and trending higher again.

At the time of writing on Wednesday, GBP/AUD was trending nearer the week’s best levels of 1.7950.

Demand for the Pound has actually risen since last night’s UK Parliament Brexit vote, and the latest disappointing Australian data has made it even easier for the Pound to Australian Dollar exchange rate to hold its recovery and advance.

GBP Exchange Rates Advance on Hopes that a Harder or Disorderly Brexit Can Be Avoided


Despite the UK government facing a huge defeat in a Parliament vote over its UK-EU Brexit deal last night, the Pound saw stronger demand following the vote as markets digested the results and their implications for the future of the Brexit process.

The government’s Brexit deal, which had been negotiated over the past two years, was blocked by Parliament with a whopping majority of 230.

The vote ended up being 432 against with only 202 for the deal, and a notable chunk of UK Prime Minister Theresa May’s own Conservative Party voted against the deal too.

It marked the biggest defeat for the UK government in the history of the House of Commons.
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Investors bought the Pound amid hopes that the next steps of the Brexit process would take it further away from Pound-negative events like a worst-case scenario No-deal Brexit or a general election.

For now, markets are speculating that UK MPs will come together to put forward a softer Brexit that more can agree with, and the slight possibility of a second Brexit referendum of some sort has also risen.

Markets also increasingly expect that the formal Brexit date will be delayed, giving the government some wiggle room. Mark Carney, Governor of the Bank of England (BoE), explained on Wednesday:

‘Public market commentary, consistent with our market intelligence, that rebound appears to reflect some expectation that the process of resolution would be extended and that the prospect of no-deal may have been diminished.’


The higher expectations for a Brexit delay kept Sterling sturdy today, even if it does amount largely to ‘kicking the can’ further down the road.

AUD Exchange Rates Fails to Find Domestic Support as Australian Data Disappoints


The Pound may have strengthened slightly overnight on Brexit speculation, but the Pound to Australian Dollar exchange rate’s gains were also partially due to Australian Dollar weakness.

Investors found the Australian Dollar less appealing due to a lack of domestic support for the relatively risky trade-correlated currency.

Wednesday’s Asian session saw the publication of Australia’s Westpac consumer confidence survey results for January, which showed a notable fall from last month’s figures.

The confidence index fell from 104.4, due to a confidence change of -4.7%. The news indicated that consumers were not feeling any more confident about Australia’s economy following the holiday season.

Market bets of a Reserve Bank of Australia (RBA) interest rate hike any time soon are low. Much of the Australian Dollar’s recent strength has been due to risk-sentiment and a weaker US Dollar (USD), amid a lack of supportive Australian news.

GBP/AUD Exchange Rate Forecast: Australian Housing Data and Brexit Developments in Focus


Could the Pound to Australian Dollar exchange rate continue to climb in the coming sessions? That depends on both political developments and upcoming Australian ecostats.

Pound investors are highly focused on how the Brexit process may develop next. With the UK government’s Brexit deal voted down but the government still seen as likely to survive a no-confidence vote, the next step of Brexit is filled with uncertainties.

The UK government is under pressure to deliver an alternative resolution to its Brexit plan. Currently, it plans to hold cross-party talks in order to find a Brexit solution Parliament will agree with.

Signs of a soft Brexit, or even a possible second referendum, could make the Pound even more appealing.

The Pound may also find some relief if the UK government announces plans to delay the formal Brexit date, as many analysts increasingly believe it will.

In terms of upcoming data, Thursday’s Asian session will see the publication of Australia’s November home lending stats, and December’s new home sales figures from HIA.

These, as well as any notable shifts in risk-sentiment due to US-China trade developments or commodity news, may also influence the Pound to Australian Dollar exchange rate in the coming sessions.
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