The Australian Dollar Pound (AUD GBP) exchange rate was met by volatility on Tuesday as markets reacted to the release of the Bank of England’s (BoE) latest banking stress test.
Pound (GBP) Volatile as BoE Publishes Banking Stress Test
The Pound initially strengthened on the back of the BoE’s latest Financial Stability Report as it revealed that every major UK bank had passed its stress test for the first time since it was implemented in 2014.
Adding to this was the suggestion from BoE Governor Mark Carney that the banks would be able to cope with a ‘disorderly’ Brexit.
However markets did not remain upbeat for long as the bank’s report also warned of the possible impact of the UK government failing to secure an exit deal with the EU, something that the current state of negotiations is making look increasingly possible.
Further weakening the Pound later in the European session was the publishing of OECD’s latest economic outlook as it forecast that the UK’s economic slowdown would continue throughout 2018 as the uncertainty of Brexit drags on growth.
Australian Dollar (AUD) Gains Undermined by Retreating Iron Ore Prices
The Australian Dollar meanwhile found its advance overnight on Tuesday slowed by a dip in iron ore prices.
Spot iron ore prices had fallen around 1% to $67.27 a tonne by the start of Tuesday’s session bringing an end to a four-day streak of gains last week.
The downturn followed a notable decline in Chinese iron ore futures at the start of this week, as last week’s buying frenzy at the start of government steel production cuts appeared to fizzle out.
AUD GBP Forecast: UK Mortgage Approvals to Tumble?
Looking ahead the AUD GBP exchange rate may strengthen again on Wednesday as the UK releases its latest mortgage figures, with economists forecasting that home loan approvals will have slipped from 66,200 to 65,000 in October.
Markets are also likely to continue to shy away from Sterling over the coming days as fears over the state of Brexit negotiations grow, with concerns that Ireland will attempt to block trade discussions unless guarantees are made over the border with the UK.
Meanwhile with the next piece of notable domestic data not due to be released until Thursday the Australian Dollar may again find its movement being dictated by commodity prices.
Current Interbank Exchange Rates
At the time of writing the AUD GBP exchange rate was trending around 0.5732 and the GBP AUD exchange rate was trending around 1.17449.