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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat despite Upbeat BoE Financial Stability Report

July 11, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Muted as UK Banks Can Cope with No-Deal Brexit and Trade War

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of AU$1.7992.

On Thursday, in part of its half-yearly assessment of financial risks the Bank of England (BoE) revealed UK banks could cope with both a disorderly no-deal Brexit and a global trade war.

In its Financial Stability Report, the Financial Policy Committee stated:

‘The perceived likelihood of a no-deal Brexit has increased since the start of the year.

‘The UK banking system remains strong enough to continue to lend through the wide range of UK economic and financial shocks that could be associated with Brexit.

‘Even if a protectionist-driven global slowdown were to spill over to the UK at the same time as a worst-case disorderly Brexit, the FPC judges that the core UK banking system would be strong enough to absorb, rather than amplify, the resulting economic shocks.’

However, this could do little to buoy Sterling against the Australian Dollar.

Australian Dollar (AUD) Muted as Aussie Consumer Confidence Slumps to Two-Year Low

The Australian Dollar was left dampened as Australian consumer confidence slumped to a two-year low in July.

Westpac consumer confidence fell by 4.1% to 96.5 points suggesting consumers are growing pessimistic about the future.

Westpac Senior Economist, Matthew Hassan stated that the Reserve Bank of Australia’s (RBA) recent rate cut had little impact on confidence.

Commenting on the data, Hassan said:

‘The fall in sentiment this month is troubling as it comes against what should have been a supportive backdrop for confidence.

‘Deteriorating expectations for the economy outweighed any near-term support from the prospect of lower interest rates and tax relief.’

Pound Australian Dollar Outlook: Will a Dovish RBA Weigh on AUD?

Looking ahead to this afternoon, the Australian Dollar (AUD) could slump against the Pound (GBP) following a speech from the Reserve Bank of Australia’s (RBA) Assistant Governor Guy Debelle.

If Debelle mentions monetary policy and hints at a further interest rate cut later in the year, it could dampen sentiment in the ‘Aussie’.

Meanwhile, a speech from the Bank of England’s (BoE) Gertjan Vlieghe on Friday could cause Sterling to slump.

If Vlieghe discusses monetary policy and highlights the risks of a no-deal Brexit, it could cause the Pound Australian Dollar (GBP/AUD) exchange rate to slump.

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