Brexit uncertainty outweighs Austalian economic problems

Brexit uncertainty outweighs Austalian economic problems

AUD has come under pressure due to the latest set of GDP figures coming in below expectations for the first quarter.

Pound to Australian dollar forecast
Australian GDP fell to 1.8% over the year down from 2.3%, the worst growth since 2009. Quarter on Quarter data arrived at 0.4% which is being attributed to a drop in household spending. This provides further justification for the recent Reserve Bank of Australia rate cut to 1.25%.

Investors have been shying away from riskier, commodity-based currencies such as the Aussie due to global economic uncertainty. The Australian dollar is heavily reliant on the Chinese purchasing its goods and as such any slowdown in growth can hurt the Australian Dollar. With the US involved in a high tariff trade war with China the Australian dollar has weekend.

US dollar has strengthened despite Trump instigating the trade war due the USD being considered a safe haven currency. Now, however the Federal Reserve have voiced their concerns over the trade war and Federal Reserve Chair, Jerome Powell has stated there is the potential for rate cuts from the Fed, with the possibility of two cuts during 2019. This could increase the chances of investors moving to the Australian dollar.

Pound to Australian dollar rate, sterling under pressure

Sterling remains fragile due to the current state of Brexit and UK politics. The next PM’s stance on Brexit will be a key factor on sterling value. The majority of the candidates are Brexiteers and many of the candidates have expressed that they would be willing to leave the EU without a deal. If the probability of a no deal increases this will no doubt hurt the Pound. At present Brexit and UK politics is in limbo and I believe this will outweigh any economic problems down under. I am afraid Sterling will remain fragile short to medium term.

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