Are Greater Pound to Australian Dollar Losses Incoming on Official Brexit Trigger?

The Pound has fallen by -0.4% against the Australian Dollar today on Brexit fears and could decline further still when the Brexit process begins in earnest later this month.

While the Article 50 bill has recently passed through Parliament unchanged, even with imminent royal assent it is not expected to be enacted until March 20^th at the earliest.

Prime Minister Theresa May is not predicted to run over her self-imposed trigger deadline of March 31^st, but the delay from starting on March 14^th or 15^th now creates a problematic situation for the PM.

Separating from the EU is now inevitable, but the PM could start negotiations off on an especially sour note if she triggers Article 50 next week.

This is because of the 60^th anniversary of the Treaty of Rome signing on March 25th, which is effectively the EU’s 60^th birthday.

Triggering Article 50 on this, of all days, would likely be seen as a direct symbolic snub of the EU, but more broadly detracting from the spotlight by starting Brexit next week is not likely to inspire confidence in those hoping for a smooth negotiation process.

While recent Australian confidence figures have proven disappointing, the Australian Dollar could still appreciate if the housing market is shown to be well-managed by regulators in future.

The Reserve Bank of Australia (RBA) has recently warned about the dangers of a housing bubble developing, a concern voiced by RBA Assistant Governor for Financial Stability Michele Bullock;

‘[If housing market sentiment changes] investors can be the first ones to get out if things turn down’.

Referring to a prior lending ‘speed limit’, Bullock said that the measure ‘did address some of the risks’ of a housing bubble developing. The Assistant Governor also stressed that;

‘We’re seeing things pick up again and that’s why we’re watching it very carefully and considering if we might need to do more. What we are really focussing on is to what things like the growth in house prices and debt are signalling about whether or not households have balance sheets that can withstand a downturn’.

Broadly speaking, signs that the RBA is willing to step in before the housing market reaches a crisis state are likely to boost the value of the Australian Dollar in the future.

Recent Interbank GBP AUD Exchange Rates

At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.60 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.62.