Risk Aversion and Brexit Worries Kept GBP AUD Exchange Rate on Narrow Trend
Risk appetite weakened in anticipation of the first US presidential debate, with markets increasingly jittery over the uncertainty surrounding the outcome of the election. As a result the Australian Dollar (AUD) was weighed down, with commodity prices sliding as investors sought out safe-haven assets in order to ride out any ensuing volatility.
Confidence in the Pound (GBP) nevertheless remained somewhat limited at the start of the week due to persistent Brexit-based worries. The appeal of Sterling was dented by the news that sentiment within the financial sector has deteriorated further, posting its third consecutive quarter of decline in the three months to September. This undermined optimism in the outlook of the UK economy, although the Pound to Australian Dollar (GBP AUD) was still able to maintain a narrow uptrend.
GBP AUD Exchange Rate Forecast: UK and Australian Credit Data in Focus
Later in the week the Pound could find further support on the back of August’s consumer credit and mortgage approvals figures, which may offer renewed cause for confidence in the UK economy. Resilient optimism among lenders and consumers alike could encourage greater demand for the Pound, even if the outlook of other sectors remains rather bleaker. Should the domestic economy continue to show signs of shaking off the negative initial impact of the Brexit vote then the GBP/AUD exchange rate is likely to remain biased to the upside.
Although safe-haven demand is expected to remain heightened in the coming week the ‘Aussie’ may well rally in response to the latest Australian Private Sector Credit data. Researchers at Westpac predict a steady result, commenting:
‘For August, we expect credit to expand by 0.4%. RBA rate cuts in May and August will provide a boost to housing. That said, the impact may be relatively modest by historical standards, given the late stage of the cycle.’
If the data disappoints and faith in the health of the domestic economy weakens, however, the GBP/AUD exchange rate is forecast to extend its recent gains further.
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