Pound Australian Dollar Exchange Rate Dips, RBA Holds Interest Rate amid Downside Risks

December 3, 2019 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate Dips, RBA Holds Interest Rate amid Downside Risks

GBP/AUD Exchange Rate Eases, RBA Holds Interest Rates

The Pound Australian Dollar (GBP/AUD) exchange rate eased this morning, with the pairing currently trading around AU$1.893 after the Reserve Bank of Australia (RBA) held its interest rate decision at 0.75%.

RBA Governor Philip Lowe, however, was downbeat in his outlook, commenting that risks to Australia’s economy were ‘still tilted to the downside’.

Mr Lowe also added:

‘The US-China trade and technology disputes continue to affect international trade flows and investment as businesses scale back spending plans because of the uncertainty.’

Meanwhile, US-China trade developments are continuing to hold back the ‘Aussie’, after US President Donald Trump said that the new US Hong Kong does not improve the likelihood of a ‘phase one’ trade deal.

With China being Australia’s largest trading partner, any indications of tensions flaring-up between the world’s two largest economies will weaken the AUD/GBP exchange rate.

GBP/AUD Exchange Rate Sinks, UK Construction PMI Sinks in November

The Pound (GBP) struggled to gain today after the UK Markit construction PMI for November failed to emerge from contraction territory, despite beating forecasts and rising from 44.2 to 45.3.

Tim Moore, Economics Associate Director at IHS Markit, commented:

‘UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector. The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.’

The UK’s political uncertainty continues to haunt British markets following yesterday’s reports that the Labour Party are catching up with the Conservatives in the opinion polls.

With markets generally favouring a Conservative majority on 12th December, due to the Tories promising to resolve Brexit next month, any signs of the Tories losing their lead in the polls is Pound-negative.

However, a poll by ICM for Reuters indicated that the Conservative Party had held its 7-point lead over Labour following Friday’s attack near London Bridge.

Analysts at Reuters commented:

‘Johnson is promising a tougher stance on the release of prisoners and has accused Labour’s leader Jeremy Corbyn of being soft on terrorism. Labour says spending cuts under a decade of Conservative-led governments have made it harder to fight militancy and reintegrate prisoners.’

GBP/AUD Outlook: Could Improving Australian Growth Boost the ‘Aussie’?

Australian Dollar (AUD) investors will be awaiting tomorrow’s publication of the Australian growth figure for the third quarter, with any signs of improvement likely to boost the AUD/GBP exchange rate.

Sterling traders, meanwhile, will be awaiting tomorrow’s release of the UK Markit services PMI for November, which is expected to remain in contraction territory at 48.6.

The GBP/AUD exchange rate will continue to be driven by UK political developments this week, with any signs of the Conservatives further consolidating their lead against the Labour Party being Pound-positive.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts