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GBP/AUD Forecast: Pound to Australian Dollar Exchange Rate Slips Thanks to Latest Brexit Tensions

March 16, 2021 - Written by Frank Davies

Pound (GBP) Exchange Rates Under Pressure as Brexit Tensions Heighten

The Pound to Australian Dollar (GBP/AUD) exchange rate came under renewed pressure on Tuesday as anxiety over Brexit picked up once again.

As the EU launched legal action against the UK over a potential breach of the Northern Ireland protocol the mood towards the Pound naturally soured.

With trade already showing signs of significant disruption in the face of changed border relations the risk of a greater heightening of tensions left investors with little cause for confidence.

In the absence of any significant signs of UK economic resilience the sense of bullishness that had previously supported the Pound began to fade, leaving GBP exchange rates on the back foot.

As the Pound made significant gains since the start of the year the prospect of an extended correction appears likely, something which could drive the GBP/AUD exchange rate lower still.

Australian Dollar (AUD) Exchange Rates Remain Positive in Spite of RBA Caution

The Australian Dollar found some traction against its rivals, meanwhile, in the wake of the Reserve Bank of Australia’s (RBA) March meeting minutes.

Although the minutes confirmed that the central bank intends to keep interest rates ‘lower for longer’, with the odds of any monetary tightening looking distinctly distant in nature.

While this reinforced the relatively dovish stance of the RBA the Australian Dollar held onto a generally positive footing, as markets had largely anticipated such a message.

A solid quarter of growth seen in the fourth quarter house price index also lent some support to AUD exchange rates at this juncture.

GBP/AUD Exchange Rate Forecast: Westpac Leading Index and BoE Policy Announcement in Focus

However, the Pound to Australian Dollar exchange rate could recover some ground in the near future if the Westpac leading index fails to impress.

Unless the leading index picks up on the month for February this may prompt fresh debate over the relative health of the Australian economy.

Any evidence that the year’s initial momentum had started to slow could leave the Australian Dollar trending lower against its rivals once again.

Even so, greater GBP/AUD exchange rate volatility seems likely in the wake of Thursday’s Bank of England (BoE) policy announcement.

Signs of cautious optimism among BoE policymakers could encourage the Pound to return to a stronger footing, even though no interest rate hike looks likely in the coming months.

On the other hand, any fresh signs of caution from the central bank may leave the Pound to Australian Dollar exchange rate on the back foot.
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