Australian Dollar to Pound Sterling Exchange Rate Succumbs despite Fears over Lack of Brexit Clarity
The Australian Dollar to Pound Sterling exchange rate has slipped below opening levels alongside widespread losses for AUD elsewhere.
Weakness in GBP had kept the ‘Aussie’ afloat, yet gains have been surrendered by a lack of demand for the Australian Dollar, which has been undermined by a number of domestic and global developments.
Markets are still sore after the recent Reserve Bank of Australia (RBA) monetary policy meeting, which saw Governor Philip Lowe state that wage growth was likely to remain weak and that monetary policy tightening was still a long way off.
Yesterday’s strong New Zealand data and the approach of today’s monetary policy decision from the Reserve Bank of New Zealand (RBNZ) is also stealing focus from the Australian Dollar.
Meanwhile, markets are continuing to bet that the US Federal Reserve will hike interest rates in March, which is keeping appetite for the high-yield Australian Dollar muted today.
The recent strong uptick in the AiG performance of construction index for January from 52.8 to 54.3 has therefore provided insufficient tailwinds to support the Australian Dollar to Pound Sterling exchange rate.
Brexit Woes Slow GBP Gains, but Australian Dollar to Pound Sterling Exchange Rate Still Drops into Negative Territory
Brexit woes are weighing on the Pound today as the UK Cabinet meets to discuss its negotiating strategy amid calls for more clarity regarding the government’s aims from the private sector.
The heads of the British Chambers of Commerce (BCC) today published an open letter addressed to the Prime Minister, imploring the UK government to set out its plans for Brexit and warning that businesses are losing patience.
Further unsettling the Brexit outlook is the news that the UK’s Trade Remedies Authority – which will handle trade disputes after the UK has split from the European Union – has only 25 staff, compared to its counterparts in the US and EU, which employ 360 and 377 persons respectively.
While the government claims that this is because the body has not yet been fully set up, campaigners for a ‘soft Brexit’ have argued that this proves the UK will be outmatched during trade negotiations with the rest of the world after its membership of the EU single market and customs union comes to an end.
Open Britain Supporter and Labour MP Peter Kyle commented;
‘[Secretary for International Trade Liam Fox’s] new Trade Remedies Authority will need to fight the UK’s corner in trade disputes in just over a year’s time and yet the number of staff working on setting it up is just a fraction of what will eventually be needed.’
‘The Government’s ‘Empire 2.0’ vision of quickly signing lots of new trade deals with major economies around the world is built on sand. We don’t have the manpower or the expertise in Whitehall to make it work, and the clock is ticking.’
Federal Reserve Commentary and Focus on New Zealand Rate Decision Forecast to Keep Australian Dollar to Pound Sterling Exchange Rate Weak
There is no Australian or UK data left for release today, but developments on the international economic calendar could undermine the Australian Dollar to Pound Sterling exchange rate.
Federal Reserve official John Williams will deliver a speech later today and this could further dampen global risk appetite if he suggests that the Federal Reserve is on track to hike interest rates in March, or signals that the long-term expectations for interest rates should be for four rounds of tightening rather than the anticipated three this year.
Also likely to mute appetite for the Australian Dollar is an upcoming interest rate decision from the Reserve Bank of New Zealand (RBNZ).
Should the RBNZ prove hawkish in their assessment of the economy, the New Zealand Dollar will be much more appealing than the Australian Dollar with regards to markets looking for high-yielding currencies.
Even if the RBNZ proves dovish, this is unlikely to lend support to the Australian Dollar, as the outlook for domestic interest rates isn’t rosy either.