Pound to Australian dollar forecast: Brexit limbo hurting the pound

Pound to Australian dollar hits four week high

The pound to Australian dollar rate has suffered recently due to the current situation in UK politics and the on-going Brexit saga.

Pound to Australian dollar rate far from recent highs of 1.88

With Brexit being a key driver on GBP/AUD rates, we recently saw a spike up to 1.88 following positive news on Brexit. May’s talks with Corbyn over a deal compromise that could be mutually accepted by the Tories and Labour caused the increase in sterling’s value. I was of the belief the gains for the pound would not last long as I had little faith the talks between Corbyn and May would result in a deal that would pass through the House of Commons. This proved to be the outcome.

Following May’s resignation, the pound has fallen in value with pound to Australian dollar rates now sat at the 1.82s. I am of the belief until we have a confirmed a new UK PM and developed some Brexit clarity the pound is destined to remain fragile.

AUD under pressure from US-China trade war

The Australian dollar has had its own problems, Australia has a heavy reliance on China purchasing it’s goods and any drop in Chinese growth will impact the Australian economy and in turn the AUD. The escalation in the US-China trade war is causing investors to move away from commodity-based currencies such as the Australian dollar to safe haven currencies such as the US dollar.

There is the probability of an interest rate cut from the Reserve Bank of Australia next month, so despite the potential for further Australian dollar gains it may prove wise to move before the decision if you are selling AUD.

There is little data coming from Australia for the remainder of the week. Private Capital Expenditure and Building permits are due out during the early hours, but I would not think these releases will cause significant movement on the market. UK politics and Brexit will continue to be the key mover on GBP/AUD.

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