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Pound Australian Dollar Exchange Rate Sinks, Post-Brexit Speculation Haunts UK Markets

November 15, 2019 - Written by John Cameron

GBP/AUD Exchange Rate Eases, Post-Brexit Gloom Weighs on Sterling

The Pound Australian Dollar (GBP/AUD) exchange rate fell today, with the pairing currently trading around AU$1.893 as investor confidence in Sterling begins to slip on increasing gloom surrounding the UK’s economy post-Brexit.

Neil Mellor, the Senior Currency Strategist at BNY Mellon, was downbeat in his assessment, saying:

‘My concern is – and this is something possibly the market has thought about – that we’ve got preoccupied with the election but there is still a lot of uncertainty post-election.’

The UK will only have 11 months following Brexit to negotiate a trade deal with the European Union, a fact that continues to haunt British markets ahead of the 12th December general election.

However, the Pound (GBP) continues to be propped up by hopes that the Tories will win a majority over the Labour Party.

Ulrich Leuchtmann, Head of Commodity Research for Commerzbank, commented that Sterling continues to benefit from ‘anything that lowers Labour’s chances of winning the election’.

With no UK economic data due out until next week, it is likely that the GBP/AUD exchange rate will remain subdued into the weekend.

AUD/GBP Exchange Rate Rises on Progressing US-China Trade Talks

The risk-sensitive Australian Dollar (AUD) rose against Sterling after China lifted its nearly five-year ban on US poultry imports, improving investors’ hopes that a US-China “Phase One” trade deal could be secured in the near-term.

With China being Australia’s largest trading partner, news that China has compromised with the US has buoyed market risk-appetite for the ‘Aussie’.

Larry Kudlow, the White House’s Chief Economic Advisor, commented:

‘We’re getting close [to a US-China trade deal]. The mood music is pretty good, and that has not always been so in these things… [T]here has been very good progress and the talks have been very constructive.’

Meanwhile, the Reserve Bank of Australia’s (RBA) deputy governor Guy Debelle, declared that it was too early to dismiss the bank’s recent rate cuts as not working to improve Australia’s economy.

Mr Debelle said:

‘One thing I'm not particularly worried about in a low-interest-rate environment is its effect on bank interest margins. I think that sometimes seems to get missed in the discussion here. We are setting policy to ensure a strong Australian economy.’

GBP/AUD Outlook: UK Political Developments to Remain in Focus

Australian Dollar investors will be looking ahead to Monday’s speech by the RBA’s Assistant Governor, Christopher Kent. Any dovish comments about the Australian economy, however, could see the ‘Aussie’ begin to lose some of its gains against the Pound.

Meanwhile, Tuesday will see the release of the RBA’s meeting minutes which will provide some indications on the bank’s monetary policy going forward.

Sterling traders will be awaiting Monday’s publication of the UK Rightmove House Price Index for November.

UK political developments, however, will continue to drive the GBP/AUD exchange rate next week, with any signs of the Conservatives securing their lead ahead of the Labour Party buoying the Pound on a sense of returning political stability.

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