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Brexit Fears Limit GBP/AUD Recovery despite Market Risk-Aversion

Last week’s high: AU$1.7726

Last week’s low: AU$1.7295

Signs of Weakness in Global Growth Weakens Risk-Sentiment and Australian Dollar

The Pound to Australian Dollar exchange rate ultimately slipped last week, as Sterling remained weak on Brexit fears despite the Australian Dollar’s late-week slump.

Brexit uncertainties worsened considerably throughout the week, as UK Prime Minister Theresa May delayed an anticipated parliamentary vote on her Brexit deal yet was unable to secure any additional assurances or concessions from the EU.

Theresa May’s inability to boost the popularity of her deal left investors uncertain about the future of Brexit, as her soft Brexit plan is not expected to be able to pass through Parliament when a vote does eventually take place.

This prevented the Pound from recovering much at the end of the week, but GBP/AUD still edged higher as investors sold the Australian Dollar.

On Friday, investors were spooked by news that Chinese data had come in well below expectations, worsening concerns about growth in the economy of Australia’s biggest trade partner. This also worsened market concerns about global growth in general.

Ultimately though, the Australian Dollar benefitted from hopes for de-escalating US-China trade tensions last week.

AUD Outlook: RBA Meeting Minutes and Brexit Developments in Focus

With Brexit uncertainties only deepening in the penultimate week of the year, the Pound to Australian Dollar exchange rate will likely see more volatility. Pound investors are likely to brush over UK data and focus on developments in UK politics, particularly any signs that could indicate the direction the Brexit process takes next.

Sterling demand may rise if there are any signs that the UK could hold a second referendum, but if not the other potential outcomes may include a general election or a ‘no-deal’ Brexit.

Australian news and risk-sentiment could drive the Pound to Australian Dollar exchange rate next week too.

The Reserve Bank of Australia’s (RBA) latest meeting minutes report could inspire ‘Aussie’ movement if the bank’s monetary policy outlook surprises investors. Australia’s November jobs market report on Thursday may also prove influential.

As always, signs of de-escalation between the US and China would also leave the relatively risky Australian Dollar more appealing.

 

Key Events

18th December

00:00 Australian HIA New Home Sales

00:30 Reserve Bank of Australia (RBA) Meeting Minutes

19th December

09:30 UK Inflation Rate

11:00 UK CBI Industrial Trends Orders

20th December

Australian Westpac Leading Index

00:30 Australian Job Market Report

09:30 UK Retail Sales Report

11:00 UK CBI Distributive Trades

12:00 Bank of England (BoE) Policy Decision

21st December

00:01 UK GfK Consumer Confidence

09:30 UK Growth Rate

09:30 UK Business Investment

 

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To keep up to date with the Australian Dollar, visit the AUD blog in our Currency News section.

Alastair Archbold
Currency Trader
T: 01442 892 062

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