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Unexpected Outcome to Brexit Start Narrows Australian Dollar to Pound Gap

AUD USD exchange rate

Against forecasts, the Australian Dollar has traded tightly against the Pound today as the UK officially starts to leave the EU.

Recent Australian data has been supportive, with iron ore prices rebounding on still-high Chinese demand. Commenting on the shift was Credit Suisse Research Analyst Matthew Hope;

‘We suspect that [prices] will recover under the force of demand as April approaches and construction winds up. Steel mills will watch pricing, but if physical prices and steel prices stay high, they will soon return to start buying iron ore again’.

Conversely, impactful ecostats from the US have lowered the Australian Dollar’s value, with pending home sales in February rising above forecasts on the month and the year. This raised support for the US Dollar, which has in turn lowered AUD value.

For the Pound, the post-Article 50 wake has seen wild fluctuations in value, with the most recent movement seeing a dip due to uncertainty about how Brexit negotiations will unfold.

The process of starting Brexit began late on Tuesday, when Prime Minister Theresa May signed the letter triggering Article 50. As predicted, the Pound fell on the news. However, given how prepared traders were beforehand, losses were ultimately minimal.

The GBP AUD exchange rate initially dropped from 1.63 to 1.61 on the earlier-than-expected news, only for the Pound to shake off the damage and rise back up to 1.63.

While great uncertainty remains about how the forthcoming Brexit negotiations will turn out, Pound demand has still been kept relatively stable by waning US Dollar confidence.

One of the week’s rare pieces of Australian domestic data is due today, covering new home sales in February. Previously, a monthly drop of -2.2% was seen, so a return to a positive range may be enough to trigger a GBP AUD rally.

In these extremely early days of Brexit negotiations, the Pound is not expected to be moved too much by preliminary remarks. More likely to trigger a shift will be today’s GfK consumer confidence score, along with Friday’s GDP growth stats.

Confidence may end up damaging the Pound as a drop is predicted; annual GDP growth is also expected to fall, which may see the Pound close weekly trading down against the Australian Dollar.

Recent Interbank AUD GBP Exchange Rates

At the time of writing, the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.61 and the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.63.