As the Pound continues to shed its recent gains amid reignited hard Brexit fears, the British Pound to Australian Dollar (GBP/AUD) exchange rate has shed last week’s weekly gains. The Australian Dollar has seen more mixed movement, steadying as markets highly anticipate key Australian job market data due for publication tomorrow. Meanwhile, Pound investors are highly anticipating potential Brexit and Bank of England (BoE) speculation.
Last week, higher market demand for trade-correlated currencies like the Australian Dollar limited GBP/AUD gains and the pair was unable to hold its post 2016 Brexit Referendum highs of 1.9513. Despite this, GBP/AUD still gained a strong 1.9202 to 1.9386 throughout the week.
This week though, GBP/AUD has reversed those gains and has continued to plunge even lower as Brexit fears return.
Today, GBP/AUD touched on a weekly low of 1.9072 and currently trends closer to the level of 1.9086. While the pair has avoided falling as low as last week’s worst levels, this may be partially due to the Australian Dollar’s limited appeal.
GBP Exchange Rates Continue to Tumble as Markets Digest Hard Brexit Fears
The Pound remained unappealing today, following yesterday’s plummet on revived fears of a hard Brexit.
While last week’s UK General Election briefly boost hopes of a softer Brexit and sent the Pound soaring, fresh news from the new Conservative majority government shocked investors yesterday.
Rather than using the bigger majority to help to assure a relatively soft Brexit plan, UK Prime Minister Boris Johnson indicated he would outlaw any attempts to extend next year’s Brexit transition period.
This caused a surge in concerns that the Brexit process could still end with a cliff-edge outcome, a hard Brexit that would leave UK-EU trade with World Trade Organisation (WTO) rules.
As a result, the Pound plummeted yesterday and remained under pressure today. According to Thy Lan Nguyen, FX Strategist at Commerzbank:
‘This is a correction of the election euphoria, slowly but surely, as the realisation sets in that this whole Brexit drama is not over yet and just another deadline of a hard Brexit will be looming eventually at the end of the year,’
Due to the broad focus on revived hard Brexit fears, the latest UK inflation rate stats did little to influence the Pound.
In fact, some analysts believe that despite higher inflation the Bank of England (BoE) is likely to cut UK interest rates in the coming year amid Brexit uncertainty.
AUD Exchange Rates Steady ahead of Anticipated Australian Job Stats
Market concern that the Reserve Bank of Australia (RBA) could be pressured into taking a more dovish stance on Australian monetary policy amid weaker Australian data and trade uncertainties were only worsened by this week’s RBA meeting minutes report.
In the minutes, the bank indicated that it could reassess its outlook in February. This caused a rise in RBA interest rate cut bets.
Since then, Australian Dollar investors have been eagerly anticipating more data that could show signs of recovery in Australia’s economic outlook.
The Australian Dollar has also been influenced by market trade developments.
US-China trade optimism has softened slightly since yesterday, but the Australian Dollar has been able to avoid losses amid market anticipation for tomorrow’s major Australian job stats results.
GBP/AUD Exchange Rate Forecast: Australian Job Stats Could Influence RBA Bets
Key UK and Australian data will be published through the end of the week, and tomorrow’s Australian data could be influential for the Pound to Australian Dollar exchange rate.
Australian job market results from November will be published during the Asian session. As Australia’s job market is closely watched by the Reserve Bank of Australia (RBA) this data could impact RBA interest rate cut bets and AUD movement if it surprises.
Strong Australian job stats could soften speculation of a February interest rate cut from the RBA, but weak data could lead to rate cut bets and ‘Aussie’ losses.
Britain’s November retail sales results will be published tomorrow as well, but are likely to be overshadowed by the day’s Bank of England (BoE) policy decision.
Any surprising shifts in tone from the bank, or Brexit developments in the coming days, could cause significant Pound to Australian Dollar exchange rate movement.
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