July 29, 2019 - Written by John Cameron
STORY LINK ‘Real Prospect’ of No-Deal Brexit Causes Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate to Slide
Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as Raab Demands ‘Undemocratic’ Backstop be Scrapped
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around 0.5% this morning.
The pairing is currently trading at an inter-bank rate of AU$1.7820.
Sterling slumped against a handful of currencies as investors became increasingly worried the risk of a no-deal Brexit increased.
Michael Gove, Chancellor of the Duchy of Lancaster said on Sunday that the Government is ‘working on the assumption’ of a no-deal Brexit.
Writing in the Sunday Times, Gove noted that a ‘no-deal is now a very real prospect.’
Meanwhile, on Monday Foreign Secretary Dominic Raab said the government still wanted to strike a ‘good’ deal with the EU.
However, he noted the ‘undemocratic’ backstop must be scrapped.
Speaking to BBC Radio 4, Raab stated that it would be ‘much easier’ to reach a better deal with Brussels by leaving the bloc without a deal.
Australian Dollar (AUD) Rises despite Expectations for First US Fed Rate Cut in a Decade
The risk-sensitive ‘Aussie’ rose against the Pound despite ongoing concerns over US-China trade talks and this week’s upcoming US Federal Reserve meeting.
This week, US policymakers are expected to cut interest rates for the first time since the height of the financial crisis a decade ago.
Meanwhile, on Sunday evening former Fed Chair, Janet Yellen said she was in favour of an interest rate cut.
Speaking at an Aspen Economic Strategy Group meeting in Colorado, Yellen noted:
‘The United States isn’t an island. We’re part of the global economy. What happens in the rest of the world – in Europe, in Asia – affects the United States. And it’s also true that US monetary policy affects conditions all around the globe.’
Will the RBA Cut Rates for the Third Time?
Meanwhile, reports suggest that a third Reserve Bank of Australia (RBA) rate cut could happen as soon as next week.
While economists believe a third consecutive cut is unlikely, disappointing inflation could push the RBA towards cutting rates.
There is just a 20% chance the RBA will cut rates in August, however the bank is expected to cut rates at least once more this year.
Commenting on this, IFM Investors Chief Economist Alex Joiner said:
‘If you were to see [inflation] disappoint materially, each meeting in the second half of the year becomes live.
‘Personally I think the pressure would be on the RBA to cut later this year. The indicators for the labour market have all softened. What you’d expect to happen is the pace of employment growth to slow and in that environment of stronger participation rate and strong population growth, the unemployment rate will move higher.’
Pound Australian Dollar Outlook: Will AUD Slide on Disappointing US-China In-Person Talks?
Looking ahead to Tuesday, the Australian Dollar (AUD) could slide against the Pound (GBP) following the release of the Australian building permits.
If June’s building permits slump further than expected, ‘Aussie’ sentiment could slump.
Meanwhile, AUD could be left under pressure as face-to-face talks between US and Chinese officials are scheduled to resume in Shanghai on Tuesday.
Expectations for a breakthrough is unlikely, which could cause the Pound Australian Dollar (GBP/AUD) exchange rate to edge up.
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TAGS: Pound Australian Dollar Forecasts