March 15, 2019 - Written by Frank Davies
STORY LINK Pound Australian Dollar Exchange Rate: GBP/AUD Softens on Prospect of Extended Brexit Uncertainty
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls in spite of Brexit Extension Vote
After Parliament voted in favour of extending the Brexit deadline the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate failed to find fresh gains.
The mood towards Pound Sterling soured somewhat in the wake of the vote, with markets bracing for an even longer period of Brexit-based uncertainty.
Although the odds of the UK crashing out of the EU without a deal in a fortnight have declined GBP exchange rates were unable to return to their recent highs.
With market optimism already largely exhausted the Pound struggled to find fresh support ahead of the weekend.
Investors were also discouraged by the prospect of Theresa May putting her rejected Brexit deal to a third or even fourth ‘meaningful vote’ in the days ahead.
Global Trade Worries Limit Australian Dollar (AUD) Exchange Rate Strength
Demand for the Australian Dollar remained limited, however, as the prospect of an imminent US-China trade agreement faded further.
With officials now reportedly targeting an April meeting, or potentially even later, the trade spat looks set to persist for longer.
This weighed on the risk-sensitive Australian Dollar on Friday, especially given existing signs of weakness within recent Chinese data.
As worries over the global growth outlook increased this left AUD exchange rates on a weaker footing, with confidence in the Australian economy already muted.
GBP/AUD Exchange Rate Volatility Forecast amid Brexit Developments
Brexit developments look set to drive further volatility for the GBP/AUD exchange rate in the days ahead.
A third vote on May’s Brexit deal could weigh heavily on the Pound, given the existing opposition to the proposal in its current state.
Unless there are signs of progress towards a mutually agreeable Brexit solution the Pound risks falling further out of favour with its rivals, exposing GBP exchange rates to fresh selling pressure.
As James Smith, Developed Markets Economist at ING, commented:
‘On the basis that the Attorney General doesn't manage pull a rabbit out of the hat, in the end it will come down to politics. Whether or not May's deal succeeds will depend on a) whether the Brexiteers think there is a real chance of a long Brexit delay and b) whether they think Parliament is likely to rally around a softer Brexit alternative.’
A lingering sense of uncertainty over Brexit looks set to limit the upside potential of the GBP/AUD exchange rate, especially if political jitters increase.
Australian Dollar (AUD) Exchange Rates Vulnerable Ahead of RBA Minutes
However, the Australian Dollar could face a fresh downturn on Tuesday thanks to the release of the latest Reserve Bank of Australia (RBA) meeting minutes.
Signs of increasing dovishness among policymakers could see AUD exchange rates trending sharply lower.
While the odds of any imminent monetary tightening have diminished significantly already investors may still be spooked by a more cautious set of minutes.
If the RBA appears to be leaning more towards an interest rate cut than a rate hike this could dent the Australian Dollar, offering the GBP/AUD exchange rate a fresh rallying point.
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TAGS: Pound Australian Dollar Forecasts