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GBP to AUD Exchange Rate Recovery Falls Short as Chinese Data and Risk-Sentiment Supports ‘Aussie’

April 12, 2019 - Written by Minesh Chaudhari

For most of the week, the British Pound to Australian Dollar (GBP/AUD) exchange rate has trended lower due to Brexit uncertainty hitting the Pound, while the Australian Dollar benefitted from much of the week’s risk-sentiment. Due to signs of strength in Australia’s economy, Reserve Bank of Australia (RBA) interest rate cut bets have remained light and the ‘Aussie’ has avoided losses.

In what looks to be GBP/AUD’s fourth consecutive week of losses, the pair has tumbled since opening this week at the level of 1.8346. At the time of writing on Friday morning, GBP/AUD trends close to the level of 1.8280 after tumbling back from last night’s recovery attempt. However, the pair did trend above Wednesday’s month and a half low of 1.8252.

Demand for the Pound has remained relatively weak since the Brexit process was confirmed to be delayed, amid expectations for weeks of quieter progress while the future of Britain’s economy remained shrouded in uncertainty.

Despite mixed market risk-sentiment this week, the Australian Dollar has been able to benefit amid hopes that the Reserve Bank of Australia (RBA) will not cut Australian interest rates in the near future.

GBP Exchange Rates Remain Unappealing as Brexit Uncertainty Persists

Today was – briefly – going to be Brexit today. After the UK and EU first delayed the formal Brexit date from the 29th of March, the 12th of April was the new agreed date.

However, as many politicians and analysts expected, the UK was unable to pass a Brexit plan through Parliament within that short two week timeframe, meaning the nation had to agree to a fresh Brexit delay with the EU.

In the middle of the week, the UK and EU agreed to a flexible extension to the process, which would see Britain remain in the EU until the 31st of October unless it is able to pass a Brexit plan through Parliament sooner than that.

While the agreement was relieving to markets, it was also expected. On top of this, it means a potential six extra months of UK political uncertainty, while businesses and markets struggled to make new plans amid a lack of clarity over Britain’s economic future.

For now, UK Prime Minister Theresa May is still attempting to reach a compromise on Brexit with opposition Leader Jeremy Corbyn, though analysts don’t expect these talks will result in any major developments.

Instead, as politicians breathe a small sigh of relief, Pound trade remains jittery as markets are unsure how long it will be until the next major Brexit developments are made.

AUD Exchange Rates Resilient as Economic Growth Speculation Supports Risk-Sentiment

For most of the week, the Australian Dollar has been benefitting from weakness in rivals, as investors remain optimistic that the Reserve Bank of Australia (RBA) will not cut Australian interest rates any time soon.

Recent Australian data has indicated some economic resilience in Australia, and RBA officials have edged away from taking more dovish stances as a result.

In the middle of the week, the Australian Dollar found some support as RBA Deputy Governor Guy Debelle appeared hesitant to signal that monetary policy was likely to be eased, instead taking a more ‘wait and see’ stance on Australian economic activity.

This has kept the Australian Dollar among the more appealing of the risky trade-correlated currencies, amid broad weakness in its rival the New Zealand Dollar (NZD).

As China is Australia’s biggest trade partner, the Australian Dollar saw a late-week boost this morning thanks to some stronger than expected Chinese export data.

This made markets hopeful that the global economic slowdown was showing signs of recovery. It also helped the Australian Dollar to hold most of its weekly gains despite dipping on Thursday.

GBP/AUD Exchange Rate Forecast: Australian Job Market Report in Focus Next Week

Australia’s resilient job market has been among the most supportive aspects of Australian economic activity in recent months, and continued strength in the sector is likely to make the Reserve Bank of Australia (RBA) more hesitant to cut Australian interest rates any time soon.

With the Brexit process likely to take a breather as UK Parliament breaks for recess, Pound movement will be left in limbo.

As a result, while next week’s UK job market and inflation data has the potential to be relatively influential amid a lack of fresh Brexit news, the Pound to Australian Dollar exchange rate is even more likely to be influenced by Australian news for now.

Tuesday will see the publication of the Reserve Bank of Australia’s latest meeting minutes results, followed by Westpac’s Australian leading index on Wednesday and of course the nation’s key job market data on Thursday.

With US-China trade negotiations and global growth jitters still influencing risk-sentiment, next week’s Chinese growth and retail sales stats could also influence the Pound to Australian Dollar exchange rate.
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