GBP/AUD Exchange Rate Drops -0.5% after Emergency Brexit Plans Drain Trader Confidence

August 24, 2018 – Written by Ben Hughes

On Thursday, the Pound to Australian Dollar (GBP/AUD) exchange rate opened in the region of AU$ 1.7592 and closed up higher around AU$ 1.7677.

This appreciation came after the reveal of government plans for a no-deal Brexit, although the day’s GBP/AUD exchange rate rise was primarily because of Australian Dollar weakness.

Brexit Impact Papers Trigger GBP/AUD Exchange Rate Losses

The Pound (GBP) has fallen sharply against the Australian Dollar (AUD) today, with the GBP/AUD exchange rate dropping to a level of AU$ 1.7587.

Pound Sterling’s prior lead against the Australian Dollar is ebbing away because of this movement, although the GBP/AUD exchange rate remains above the week’s opening rate of AU$ 1.7442.

Thursday’s reveal of the government’s no-deal Brexit plans has remained in the headlines today, with a number of negative assessments lowering GBP trader confidence.

While Sterling rose against the Australian Dollar yesterday when the plans were revealed, it was mainly the latter currency’s devaluation on a political scuffle that enabled a GBP/AUD exchange rate rise.

Among other talking points, it was revealed that in the event of a no-deal Brexit UK consumers could see increased costs for card payments when shopping in the EU, in addition to a potential loss of pension incomes for UK expats in the EU.

Touching on one of several concerning conclusions raised by the emergency plans, campaign group People’s Vote said:

‘There would be an unprecedented sudden increase in red tape for Britain’s trading businesses.

‘This will result in huge hikes in costs, which may be passed on to consumers in the form of higher prices. The new burdens are likely to hit small and medium sized businesses disproportionately.’

Australian Dollar to Pound (AUD/GBP) Exchange Rate Recovers after Change of Leadership

The Australian Dollar to Pound (AUD/GBP) exchange rate has risen today to a level of £0.5683, although in the bigger picture this represents a recovery for the Australian currency.

The AUD/GBP exchange rate fell from £0.5690 to £0.5652 on Thursday and has only just managed to return to a better exchange rate.

The biggest news for Australian Dollar traders has been a change of leadership in the Australian government, with Prime Minister Malcolm Turnbull being replaced by former Treasurer Scott Morrison.

The Australian Dollar initially tumbled on the news because of fears about a sudden change in Australian government policies, but has since regained lost ground on hopes for better decisions from the new leadership.

Mr Morrison’s deposing of Mr Turnbull is not unprecedented – Mr Turnbull took over as Prime Minister from Tony Abbott in 2015 after a successful leadership challenge.

This history of frequent changes of Prime Minister could explain why the Australian Dollar did not post greater losses against the Pound.

Mr Morrison downplayed speculation about an election in the near-future, saying:

‘Our job…is to ensure that we not only bring our party back together, which has been bruised and battered this week, but that will enable us to ensure we bring the parliament back together.

‘We intend to be governing. I don’t think anybody should be making any plans for any elections any time soon.’

Outside of the domestic political news, the Australian Dollar has also firmed against the Pound because of a weaker US Dollar.

The US currency has been devalued by uncertainty about what Federal Reserve Chair Jerome Powell will say at a central banker meeting this evening.

Pound Sterling to Australian Dollar Exchange Rate Forecast: Are GBP/AUD Gains ahead on AU Building Permit Stats?

The coming week won’t bring much high-impact UK economic news, but the Pound to Australian Dollar (GBP/AUD) exchange rate could still rise if AU data disappoints.

Next week’s first significant Australian data will be Thursday’s building permits reading for July, which is tipped to show a notable decline from 6.4% to -3%.

Fewer permits being granted means that there could be reduced construction sector activity in the future, which ultimately risks slower Australian economic growth.

If the Pound rises against the Australian Dollar on such news, it could fall back on Friday if the late-week AIG manufacturing index shows forecast-matching growth.

The Australian manufacturing reading for August is tipped to show growth from 52 points to 55.1, which would represent a faster pace of sector expansion.

Such late-week good news might lead to an AUD/GBP exchange rate rise before the weekend.

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TAGS: Pound Australian Dollar Forecasts