Pound to AUD rate gets off to a bad start, are further falls likely this week?

Pound to Australian Dollar Forecast: UK policymakers talk down the Pound

The Pound to AUD rate has dropped to its lowest level in over 2 months this morning, as the pair haven’t traded as low as 1.7852 since early September. Over the past month the Australian Dollar has gained by over 3% against the Pound and this trend doesn’t appear to be changing anytime soon if this morning’s price movement is anything to go by.

Why has the Pound to AUD rate dropped?

It’s likely that the drop is due to concerns over there being further resignations from Theresa May’s Government. On Friday afternoon the brother of Boris Johnson, Jo Johnson resigned stating that it would be a democratic travesty not to have another Brexit vote. The Pound did soften on Friday once the news broke but rumours over the weekend are likely to be the reason for the further falls this morning.

There are plenty of issues from the UK side that could influence the pair such as the Northern Irish border along with whether the 10 members of the DUP party will continue to prop up the UK Government. Fears surrounding a no-deal Brexit continue to build as do calls for a 2nd referendum now that there is little time remaining and still a deal isn’t in place.

China’s influence on AUD exchange rates

On the Australian Dollar side a number of economists have recently highlighted the correlation between the AUD and the Chinese Yuan, owing to the connection between the Australian and the Chinese economies. Events in China hold the potential to impact AUD exchange rates so those interested in the value of the Aussie Dollar should pay attention to key Chinese data, and also how the US – China trade war continues to impact Chinese economic growth.

Pound to AUD rate: Economic data for the week ahead

In terms of economic data due this week, we are expecting Average Earnings data on Tuesday, along with Inflation data on Wednesday.

In Australia the main release is likely to be Employment data which is released on Thursday. With Australian unemployment at its lowest levels since April 2012 I expect the figures to be watched closely by the markets whilst holding the potential to move markets depending on the outcome.

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