Pound Australian Dollar (GBP/AUD) Exchange Rate Returns to Downtrend Amid Brexit Uncertainty

March 14, 2019 – Written by Frank Davies

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Fails to Hold Gains After Latest Brexit Vote

After hitting its highest level since the Brexit referendum the Pound Sterling to Australian Dollar (GBP/AUD) struggled to hold onto its bullish trend.

While MPs voted to rule out a no-deal Brexit during Wednesday’s debate this was not enough to keep the Pound on a stronger footing for long.

Even though the risk of the UK crashing out of the EU without a deal has diminished a sense of uncertainty continues to cloud the political and economic outlook.

As Parliament prepared to vote once again, this time on a potential extension to the Article 50 deadline, the mood towards the Pound started to sour.

The continued decline of the RICS house price balance put additional pressure on GBP exchange rates, meanwhile.

GBP/AUD Exchange Rate Vulnerable to Fresh Brexit Developments

Further volatility looks likely for the GBP/AUD exchange rate in the wake of Parliament’s next round of votes, with markets still weighing up the likely outcome of the Brexit process.

If an amendment paving the way for a second referendum gains sufficient support this could offer the Pound a fresh boost.

However, the prospect of an extended period of Brexit-based uncertainty and political anxiety may weigh on GBP exchange rates in the wake of the results.

Even if MPs vote in favour of extending the deadline unless there are signs of progress towards a workable deal the upside potential of the Pound is likely to prove limited.

Higher Inflation Expectations Fail to Boost Australian Dollar (AUD)

The mood towards the Australian Dollar, meanwhile, failed to pick up on the back of March’s Australian consumer inflation expectations survey.

Although the results suggested that inflationary pressure could accelerate firmly in the months ahead this was not enough to shore up AUD exchange rates.

As the Reserve Bank of Australia (RBA) still looks set to leave interest rates on hold for the foreseeable future this uptick did little to bolster the appeal of the Australian Dollar.

A slowdown in the latest Chinese industrial production data, on the other hand, weighed heavily on AUD exchange rates.

With the world’s second largest economy continuing to show signs of weakness the mood towards the risk-sensitive Australian Dollar naturally soured.

Global Trade Tensions Forecast to Limit Australian Dollar (AUD) Exchange Rate Strength

A persistent lack of progress on the US-China trade agreement may also offer support to the GBP/AUD exchange rate in the near future.

Lingering market worries over the health of the global economy could keep the Australian Dollar on a weaker footing.

Further pressure may be in store for AUD exchange rates with the release of the RBA’s March meeting minutes on Tuesday, meanwhile.

Evidence of greater dovishness among RBA policymakers may help the GBP/AUD exchange rate to recover some of its recent losses, even though the odds of an RBA interest rate cut remain slim.

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TAGS: Pound Australian Dollar Forecasts