GBP/AUD Exchange Rate Drops -0.4% on Concerns over Brexit Progress
The Pound (GBP) has made moderate losses against the Australian Dollar (AUD) today, in addition to falling against most other currency peers.
This poor performance is down to growing concerns that there has not been enough progress in Brexit talks this year.
For context, the provisional deadline of October is fast approaching and there are still major issues that have yet to be resolved.
A factor that has contributed to GBP/AUD exchange rate losses today has been the Bank of England (BoE) financial stability report.
The BoE’s report stressed that there is a danger of disruption for UK financial services, given that there is currently no real system in place for post-Brexit access:
‘As yet the EU has not indicated a solution analogous to a temporary permissions regime.
‘European Economic Area (EEA) customers remain reliant on UK-based financial companies being able to overcome any future barriers to cross service provision.
‘The Financial Policy Committee judges that material risks remain.’
This comes alongside a call from UK businesses and industry bodies for Brexit clarity, which has put the limited progress of Brexit talks this year into sharp focus.
Some slightly more positive news has come from the Confederation of British Industry (CBI) today, which has reported the fastest pace of UK retail sales growth in June since September 2017.
Even this data wasn’t entirely positive, however; commenting on today’s sales stats, CBI Head of Economic Intelligence Anna Leach said:
‘Higher-than-average temperatures seem to have had a positive impact on shoppers, with retailers benefitting from above-average seasonal sales and improved order volumes growth.
‘While today’s findings will bring some summer cheer to retailers, underlying conditions for the sector remain challenging.
‘Household spending remains under pressure from the slow recovery in real wage growth and the sector is still grappling with key structural changes like digital transformation.’
Australian Dollar to Pound (AUD/GBP) Exchange Rate Rises on Signs of US Trade War De-Escalation
Having fluctuated against the Pound (GBP) on Monday and Tuesday, the Australian Dollar (AUD) has since made steady gains in the AUD/GBP pairing thanks to the latest US developments.
In a sign that there could be a de-escalation of the US-China trade conflict, there are reports that the US may no longer be looking to block Chinese companies from buying parts of US companies.
Although the situation could deteriorate again in the future, for now the Australian Dollar has appreciated because of a reduced risk of further escalation.
While this appears to be a US-China issue, the AUD has risen because China is Australia’s biggest trading partner, so more stable conditions are better for both nations.
GBP/AUD Forecast: Will Pound Sterling to Australian Dollar Exchange Rate Recover on Haldane Speech?
The Pound’s (GBP) recent difficulties in trading against the Australian Dollar (AUD) could give way to gains on Thursday afternoon, after a Bank of England (BoE) speech.
BoE policymaker Andy Haldane, who voted for higher interest rates last week, will be speaking during the afternoon at an annual Academy of Social Sciences lecture.
Although this format won’t necessarily mean that Mr Haldane discusses monetary policy, there is still a chance for Pound boosting remarks from the BoE official.
Given how he made the headlines last week, GBP traders will be looking for any signs that Mr Haldane continues to back higher interest rates, potentially to the extent of there being an August rate hike.
There are concerns that BoE monetary policy might become more cautious from September onwards, but for the time being a hint from Mr Haldane for an August interest rate hike might be enough to boost the GBP/AUD exchange rate.
Beyond this speech, however, the week might end on a sour note for Pound traders if Friday’s GDP and business investment stats confirm that growth and business spending slowed in Q1 2018.
These outcomes are largely anticipated anyway, but official confirmations could still lower confidence among GBP traders and devalue the Pound.
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