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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides as UK Fails to Present Solution to ‘Undemocratic’ Irish Backstop

September 16, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as the UK Fails to Propose Irish Backstop Alternative

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped and the pairing is currently trading at around AU$1.8101.

Concerns the UK will struggle to secure a Brexit deal with the European Union surged at the start of the week, leaving the Pound under pressure.

While Downing Street called today’s meeting between the Prime Minister and President of the European Commission ‘constructive’, the issue of the Irish backstop continues to linger.

Following the working lunch, the Commission revealed that the UK has not yet come forward with a solution to the backstop which Boris Johnson previously labelled as ‘undemocratic’.

Without a solution in sight, it is likely Sterling remained under pressure as the chance Britain will leave the bloc without a deal increased.

Meanwhile, both Johnson and Jean-Claude Juncker agreed that discussions ‘needed to intensify’ and meetings ‘would soon take place on a daily basis’.

However, Downing reiterated that whatever the outcome, the Prime Minister ‘would not request an extension and would take the UK out of the EU on 31 October’.

Australian Dollar (AUD) Edges Up as US Blame Iran for Oil Attacks

Saturday’s attacks on Saudi Arabian oil refining facilities caused an upswing in support for safe-haven currencies and oil-producing countries.

However, risk-appetite decreased as the attacks sparked the largest surge in oil prices since 1991.

Added to this, the US blamed Iran despite Yemen’s Iran-aligned Houthi group claiming responsibility for the attacks.

On Sunday, US President Trump tweeted:

‘Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!’

Meanwhile, Iran has denied they are to blame for the attacks, and stated it was ready for ‘full-fledged war’.

Australian Dollar (AUD) Rises despite China’s Worst Industrial Output in 17 and a Half Years

The Australian Dollar edged up against Sterling on Monday despite data revealing the slowdown of China’s economy deepened.

China's industrial output fell to its weakest level in 17 and a half years as trade tensions dampened growth and softened domestic demand.

Reinforcing views the country’s central bank will cut its key interest rate for the first time in three years, both China’s investment gauges and retail sales worsened.

Meanwhile, last week saw a thawing of tensions between the US and China ahead of next month’s in-person talks.

However, markets do not expect this to result in a trade deal or a major de-escalation of tensions in the near future.

Pound Australian Dollar Outlook: Will a Dovish RBA Leave AUD Under Pressure?

Looking ahead to the start of Tuesday’s session, it is likely the Australian Dollar (AUD) could slide against Sterling (GBP) following the release of Australia’s Q2 House Price Index.

If house prices continue to plummet, the ‘Aussie’ could suffer losses.

Meanwhile, the Reserve Bank of Australia (RBA) is expected to release its meeting minutes which could cause AUD to fall further.

If the bank’s minutes are overly dovish, hinting the likelihood of a further rate cut in 2019 has increased, the Pound Australian Dollar (GBP/AUD) exchange rate could rise.

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