February 12, 2019 - Written by John Cameron
STORY LINK Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Rises on Carney ‘Acid Test’ Brexit Speech
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Claws Back Losses Following BoE Carney Speech
The Pound Australian Dollar (GBP/AUD) exchange rate slid over the course of the morning before clawing back some of its losses, with the pairing currently trading at an inter-bank rate of AU$1.8163.
This afternoon saw the Bank of England (BoE) Governor Mark Carney give an upbeat speech which helped the Pound to rise again.
Discussing Brexit, Carney stated:
‘Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability. Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. In these respects, Brexit could affect both the short and long-term global outlooks.’
Carney remained positive about the future, after being asked if UK is ‘the canary in the coal mine for the new world order’, he responded:
‘The bird may be towards the bottom of the cage, but it’s still fluttering.’
Earlier: Australian Dollar (AUD) Gains from Improved Risk Sentiment despite Huge Housing Miss
Australian home loans for December contracted by a worse-than-forecast -6.1%, the greatest monthly fall since May 2015, which led to the assumption that there will be even larger falls in home prices than predicted.
Investment lending for homes also contracted a further -4.4%, with the National Australia Bank (NAB) suggesting this could lead to a large unwind in employment.
The bank further predicted that investment will slide by over -18% in the next two years; higher than the contraction of -10% the Reserve Bank of Australia (RBA) forecast.
This could mean that 150,000 residential construction workers could lose their jobs due to the downturn in house building.
The Australian Dollar (AUD) saw upward support from an ease in global risk sentiment following an announcement overnight regarding the threatened US government shutdown.
Republicans and Democrats reportedly reached an agreement in principle over US border security, which would see $1.375 billion for physical barriers without funding President Trump’s wall.
Donald Trump helped boost risk-on sentiment when he commented that he was keen to meet with his Chinese counterpart, Xi Jinping in the next month, further buoying the risk-sensitive ‘Aussie’.
Yesterday: Pound (GBP) Slides as UK Economy Slows to Six-Year Low
The Pound Australian Dollar (GBP/AUD) exchange rate slipped over the course of Monday, with the dip at the start of the session likely due to disappointing UK GDP data releases.
The UK’s GDP figure showed that the economy had slowed to a six year low in 2018, with further data showing that the manufacturing sector fell into a recession.
While this slowdown was expected, the severity was a shock, with the gloomy picture of slower growth in 2019 weighing down the Pound.
Nevertheless, Chancellor Philip Hammond stated the data showed the economy remained ‘fundamentally strong’ due to the growth, and that he did not see a recession on the horizon.
Outlook: Will GBP/AUD Rise on Poor AUD Consumer Confidence?
This evening Westpac will release the Australian February Consumer Confidence figures, which could cause the pairing to gain if the figure falls further than the previous -4.4%.
The Pound Australian Dollar (GBP/AUD) exchange rate could nevertheless slip tomorrow, as the UK’s Consumer Price Index (CPI) for January is due for release.
With forecasts suggesting inflation is going fall from 2.1% to 1.9%, this may cause the Australian Dollar continue to climb into the middle of this week’s session.
The Office for National Statistics will also release the UK’s Retail Price Index (RPI), with the forecasts pointing towards prices slipping by -0.8% in January compared to the previous month.
If prices slide or fall further than expected in January it could see the GBP/AUD pairing continue to fall over the course of Wednesday.
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TAGS: Pound Australian Dollar Forecasts