Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as Bank of England Hints at Interest Rate Cuts

January 9, 2020 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as Bank of England Hints at Interest Rate Cuts

GBP/AUD Exchange Rate Eases as Brexit Uncertainties Return

The Pound Australian Dollar (GBP/AUD) exchange rate fell today, with the pairing currently trading around AU$1.898 after Mark Carney, the Bank of England’s (BoE) Governor, hinted at possible stimulus measures to boost the UK’s flagging economy in the months ahead.

Mr Carney commented:

‘There are downside risks from global growth and the possibility that uncertainties over future trading relationships could remain entrenched. With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.’

Sterling reacted negatively to fears that the central bank could step-up its fiscal stimulus measures this year, with the shadow of post-Brexit economic worries for British markets continuing to drag back some of the Pound’s gains ahead of the 31st January Brexit leaving date.

Brexit uncertainty has also returned to haunt Pound investors today, following Michel Barnier, the EU’s Chief Brexit Negotiator, said that the bloc would continue to prepare for a possible no-deal exit at the end of 2020.

As a result, the GBP/AUD exchange rate is down today due to rising fears that the UK could face further Brexit blockages further on down the line. Any compromises from Boris Johnson, however, could see Sterling rise as UK-EU tensions begin to even out.

AUD/GBP Exchange Rate Edges Higher as US-China Trade Deal Hopes Increase

The Australian Dollar (AUD) edged higher against the Pound (GBP) despite today’s publication of the Australian trade balance figure for November, which fell below forecasts of 5,915 million to 5,800 million.

However, as the US and China ready themselves to sign off the Phase One trade deal this month – and with Vice Premier Liu He set to travel to Washington next week – the risk-sensitive ‘Aussie’ has risen.

With China being one of Australia’s largest trading partner, this has provided renewed optimism for Australia’s economic recovery in the near-term.

The ‘Aussie’ has also benefited from a de-escalation of tensions between the US and Iran, which has provided relief for traders as they now seek out riskier assets.

GBP/AUD Outlook: Brexit to Remain in Spotlight

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of November’s Australian retail sales figure, which is expected to improve from 0% to 0.4%.

US-China trade developments will, however, continue to drive the AUD/GBP exchange rate this week. Any further indications that the two superpowers could secure a workable Phase One trade agreement next week would also provide AUD-positive.

The GBP/AUD exchange rate will also continue to be driven by Brexit developments, with any further dovish outlooks for the future of the British economy post-Brexit, however, proving Pound-negative.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts Pound Sterling Forecasts