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Pound to Australian Dollar Exchange Rate Advances from Latest Signs of RBA Caution

February 8, 2019 - Written by Frank Davies

- The Pound to Australian Dollar exchange rate is -0.14% lower @ 1.82277 today.

- RBA Statement dents AUD ahead of weekend.

As the Reserve Bank of Australia’s (RBA) latest Statement on Monetary Policy echoed recent cautious comments from policymakers Australian Dollar exchange rates were left on a weaker footing on Friday.

With the odds of a RBA interest rate hike continuing to diminish in the face of policymaker caution the mood towards the Australian Dollar naturally soured.

This offered a boost to the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate, even as market anxiety over Brexit continued to mount.

Deteriorating market risk appetite also weighed on AUD exchange rates, with the US still looking set to raise tariffs on Chinese products in March in spite of the promise of fresh trade talks.

Even though the Federal Reserve continued to show signs of dovishness this was not enough to prevent the GBP/AUD exchange rate returning to a positive footing ahead of the weekend.

Lack of Progress Towards Final Brexit Deal Weighs on Pound Sterling (GBP) Exchange Rates

As talks between Theresa May and EU leaders failed to yield any fresh breakthrough on the Irish border issue this limited the strength of GBP exchange rates during trade on Friday.

With the March deadline drawing ever closer markets remain concerned by the lack of a finalised Brexit agreement.

Although the odds of a no-deal Brexit remain limited the possibility of the UK crashing out of the EU in March continues to cast a shadow over the Pound.

Until the issue of the Irish border is resolved the GBP/AUD exchange rate is likely to struggle to hold onto any positive footing for long.

GBP/AUD Exchange Rate Looks for Boost on UK Gross Domestic Product Data

Confidence in the Pound looks vulnerable ahead of Monday’s UK gross domestic product data, however.

Unless the UK economy shows signs of greater resilience, shrugging off the impact of Brexit-based uncertainty, GBP exchange rates could trend lower.

With the Bank of England (BoE) already taking a cautious view of the economic outlook any signs of a slowdown could weigh heavily on the Pound.

On the other hand, forecasts point towards the quarterly growth rate picking up to 0.6% in the final three months of 2018.

A stronger showing here may be enough to give the GBP/AUD exchange rate a solid rallying point, in spite of worries over the 2019 outlook.

Australian Dollar (AUD) Exchange Rates Vulnerable to Weaker Business Confidence

As long as markets maintain a risk averse outlook the upside potential of the Australian Dollar is likely to remain limited.

AUD exchange rates could also come under pressure if January’s NAB business confidence index weakens further on the month.

Signs that sentiment within the Australian economy is continuing to sour would give investors fresh incentive to sell out of the Australian Dollar, especially if December’s lending data proves underwhelming.

Any weakening in confidence is likely to fuel bets of the economy losing further momentum over the course of 2019, exposing AUD exchange rates to fresh selling pressure.
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