Pound to Australian Dollar Exchange Rate Sees Further Falls on Persistent Brexit Concerns
The Pound to Australian Dollar (GBP/AUD) exchange rate has fallen since markets opened this week and has been unable to hold any of its recovery attempts, despite low market demand for risk-correlated currencies.
After opening this week at the level of 1.7804, GBP/AUD dipped and recovered on Monday, before tumbling once again during Tuesday’s European session.
The pair hit a low of 1.7615 towards the end of the day, but remained well above last week’s opening level of 1.7448.
The latest Pound (GBP) selloff came as a result of persistent Brexit concerns and general uncertainty in markets, despite market anticipation for Thursday’s Bank of England (BoE) policy decision.
EU chief negotiator Michel Barnier stated that trade barriers between the UK and EU would be inevitable if Britain left the customs union and single market post-Brexit, which the UK government has indicated it intends to do.
Pound (GBP) Exchange Rates Unappealing on UK PMI Data
Pound investors have seen little domestic reason to buy the currency this week either, as the latest notable UK ecostats disappointed investors and caused fresh uncertainty about the upcoming Bank of England (BoE) meeting.
Monday saw the publication of Markit’s UK services PMI from January, which fell short of analyst expectations and slowed to just 53.0. This was the lowest level for the print since 2016.
It rounded off a trio of underwhelming UK PMIs for January, which caused concerns that Britain’s economy was not as resilient during the Brexit process as economists had hoped. As a result, the composite PMI also fell short of expectations.
Australian Dollar (AUD) Largely Unchanged by Reserve Bank of Australia (RBA) Decision
Tuesday’s Asian session saw the Reserve Bank of Australia (RBA) hold its February monetary policy decision, and the outcome of the decision was largely unsurprising.
As expected, the bank left monetary policy frozen. The bank even left its forward guidance largely the same, indicating that the bank’s outlook had not notably changed since the end of last year.
This was likely a relief to some investors who had been concerned that subdued Australian inflation and wage growth could make the bank more likely to take a dovish tone – but disappointing to investors hoping that the bank would take a more hawkish tone instead.
The latest Australian ecostats weren’t particularly impressive either, with December retail sales coming in below expectations and the December trade balance coming in with a deficit.
Overall though, Pound weakness made it easier for the Australian Dollar (AUD) to hold some of its recovery.
Pound to Australian Dollar (GBP/AUD) Forecast to React to Bank of England (BoE) Decision
Wednesday’s session is unlikely to cause much movement in the Pound to Australian Dollar (GBP/AUD) exchange rate, unless there are fresh Brexit developments that cause volatility in the Pound.
Thursday’s session could be the most influential this week for the Pound however, as the Bank of England (BoE) will be holding its February monetary policy decision.
If the BoE shows any signs that it is planning to tackle Britain’s high inflation rate, the Pound is likely to strengthen as BoE interest rate hike bets would rise.
On the other hand though, if the bank expresses fresh concerns about the health of Britain’s economy following this week’s disappointing PMIs results, GBP/AUD could remain weak.
Data due on Friday, including Australian home loans and Britain’s December trade balance update, could also inspire some late-week Pound to Australian Dollar exchange rate movement.