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GBP to AUD Exchange Rate Fails to Advance despite Reserve Bank of Australia (RBA) Interest Rate Cut Bets

April 16, 2019 - Written by Toni Johnson

A rise in demand for safe haven currencies and a cautious tone from the Reserve Bank of Australia (RBA) were not enough to help the British Pound to Australian Dollar (GBP/AUD) exchange rate avoid losses today, as the latest Brexit uncertainties hit Sterling towards the end of the day. As Pound volatility has fallen though, the pair’s movements were limited.

Amid Brexit uncertainties and Australian Dollar resilience, GBP/AUD fell from 1.8348 to 1.8260 throughout last week. However, after a slight recovery of around half a cent this morning, GBP/AUD tumbled on Tuesday afternoon as the latest Brexit news and US data left the Australian Dollar appealing.

At the time of writing, GBP/AUD had lost almost a cent from the morning’s highs and trended closer to lows of 1.8192. This was the worst level for the pair since February and has been largely due to Australian Dollar resilience.

GBP Exchange Rates Fail to Find Fresh Strength amid Reports of Stalled Brexit Talks

Since last week, markets have cooled somewhat on the Brexit-battered Pound.

As investors digest a longer Brexit delay and expect that there will not be any major Brexit developments for a little while, volatility in the British currency has significantly lightened.

This has left the Pound’s movement more modest, with investors hesitant to make major moves on the British currency until there are more major Brexit developments.

As a result, the British currency’s reaction to this morning’s largely unsurprising UK job market data was relatively muted.

According to Sam Cooper, Vice President at Silicon Valley Bank, investors may still be hesitant to react to non-political news:

‘The encouraging data may fuel some confidence in Sterling, however any significant movements will likely be muted as politics remains the key focus and we approach the Easter break,’

The Pound was sold in the afternoon, on reports that Brexit talks between the UK government and opposition Labour Party had stalled.

AUD Exchange Rate Gains Limited as RBA Interest Rate Cut Bets Rise

Demand for the Australian Dollar has been relatively strong in recent weeks, but a more dovish tone from the latest Reserve Bank of Australia (RBA) meeting minutes report limited the risky trade-correlated currency’s appeal today.

The bank has recently expressed concern about slowing global economic growth, and the minutes went into more detail on the risks of Australia’s economic outlook.

According to the report, the bank may feel pressured to cut Australian interest rates if Australian inflation doesn’t improve, or if Australia’s key unemployment rate worsens.

Due to concerns that the bank may be preparing to take a more dovish tone if Australian data shows signs of slipping, investors are even more hotly anticipating Australian job market data due later in the week.

GBP/AUD Exchange Rate Forecast: Chinese Growth and Australian Job Report in Focus

With the Pound still fluctuating within a relatively tight region on the latest Brexit noise, big movements in the Pound to Australian Dollar exchange rate are more likely to be caused by influential data instead.

Major ecostats that could influence risk-sentiment and the Australian economic outlook will be published in the coming sessions and could cause a notable shift in Australian Dollar demand if they surprise investors.

First up is China’s Q1 Gross Domestic Product (GDP) growth rate report, which is forecast to have slowed from last year’s growth when it publishes tomorrow morning.

If Chinese growth shows signs of resilience amid the global economic slowdown, investors will be more willing to take risks and the Australian Dollar is likely to strengthen. Weaker data would have the opposite effect.

Thursday will see the publication of Australia’s March job market report. The resilient strength of Australia’s job market has been supporting Australia’s economic outlook and the ‘Aussie’ recently.

If it disappoints, Reserve Bank of Australia (RBA) interest rate cut bets will rise and the Australian Dollar will slump.

Tomorrow’s UK inflation rate report is unlikely to be hugely influential, but Thursday’s UK retail sales report could cause some Pound to Australian Dollar exchange rate movement if it surprises investors.
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