The GBP has retreated on the Australian dollar as worries build regarding the future of the UK. The main issues for concern are Brexit, changes to Bank of England monetary policy and the UK’s growth outlook in 2020. The GBP underperformed against all of its major rivals in yesterdays trading session. Meanwhile, the AUD remained resilient despite multiple headwinds, but the risk of an interest rate cut from the RBA is still on the table for Australia. The AUD has had to deal with a number of factors going into the week like the fires, weak wage growth and drought.
GBP Slumps Against AUD as Concerns Wade in Surrounding UK Outlook
The GBP/AUD exchange rate appeared shaky on Thursday as the pound sterling retreated from its good performance earlier in the week. The GBP underperformed against all major rivals in the European session on Thursday after the Bank of England (BoE)’s Governor Mark Carney told a conference in London that the interest rate cuts may still be on the table as monetary policy committee members are still contemplating with the idea. He did suggest however, that the BoE has the means to provide a stimulus to the economy that is equal to around 250 basis points, even with the Bank’s rate being at only 0.75%. His dovish comments on the scope for more quantitative easing for the UK economy saw the GBP drop as the message came as a shock. Investors were under the impression that the result of December’s election would have reduced downside risks and were hoping that it would lead to an economic boost.
AUD Shows Resilience but Could Be at Risk From RBA Cuts
Despite Australia’s recent spell of natural disasters and poor performance on the economic figures, the Australian dollar is still showing resilience. This performance was aided on Thursday by official data which highlighted another strong trade in goods and services surplus for November. However, the November retail sales report is looming, and the consumer sector has been soft in recent weeks and the wildfires now look threatening to the outlook of the Aussie economy. Despite the AUD holding up, the RBA could be pressured into making a cash rate cut from 0.75% to 0.50% next month in an attempt to support the economy. With 120 fires still burning through Australia, resources throughout the country are being diverted away from their usual economic activity which is likely to have a negative effect on the economic data in the months to come.
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