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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat on Halloween Brexit Extension

April 11, 2019 - Written by John Cameron

Pound Sterling Australian Dollar (GBP/AUD) Flat as Brexit Pessimism Weighs on GBP despite Halloween Delay

The Pound Australian Dollar (GBP/AUD) exchange rate remained muted, and the pairing is currently trading at an inter-bank rate of AU$1.8282.

This morning, the UK formally accepted the six-month Brexit extension to 31 October offered by the European Union.

The Halloween extension prevents the UK crashing out of the EU on Friday.

However, the Pound was left unimpressed by the delay, suggesting Brexit pessimism continues to weigh on the currency.

While Prime Minister Theresa May aimed for a shorter delay, she said the UK would leave the EU as soon as possible.

Commenting on the extension, Chris Turner, Head of Foreign Exchange Strategy at ING said:

‘The extension is unlikely to improve business confidence much, thus limiting the upside to GBP.’

Australian Dollar (AUD) Muted as Weak Australian Inflation may Trigger RBA Rate Cut

The Australian Dollar (AUD) was left muted as Australia’s consumer inflation expectations slipped from March’s 4.1% to 3.9% in April indicating that economists expect already weak inflation is set to get weaker.

Economists at the National Australia Bank (NAB) expect that both headline and underlying inflation will decelerate further in March.

If already weak inflation softens further it could put more pressure on the Reserve Bank of Australia (RBA) to cut interest rates this year.

However, in order for a near-term interest rate cut, a very weak core inflation result would be needed in the March quarter report.

Economists at ANZ, Hayden Dimes and David Plank said:

‘If core inflation for the quarter comes in at 0.3% or lower, it is likely that the near-term inflation outlook will need to be revised lower.

‘A lower starting point will challenge the return to 2% over the medium-term and thus make a rate cut in May a real possibility.’

Sterling (GBP) Flat despite UK Manufacturing Levels at Decade High

On Wednesday data showed that UK GDP rose by 0.2% in February despite markets largely expecting the UK economy to stagnate.

This recent data combined with January’s unusually strong rise of 0.5% suggests that the UK economy may have expanded by around 0.4-0.5% during Q1 2019.

Meanwhile, UK manufacturing surged by 0.9% as nervous companies stockpiled ahead of Brexit.

Manufacturing levels are now at its highest since April 2008, however this did little to buoy Sterling.

Pound Australian Dollar Outlook: Will GBP/AUD Rise as Cross-Party Discussions Continue?

The Pound (GBP) may rise against the Australian Dollar (AUD) following further cross-party talks between the Conservatives and Labour.

If reports suggest that cross-party discussions are proving successful and this will end the current Brexit deadlock, Sterling may receive an upswing of support.

Looking ahead to Friday, the risk-sensitive ‘Aussie’ could slip on disappointing Chinese imports data.

If Chinese imports slide by -9.6% as forecast, the Pound Australian Dollar (GBP/AUD) exchange rate could rise.

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