Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Soften after CBI Warns of ‘Brexit’ Job Losses
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate declined by around -0.5% on Monday afternoon.
Political turmoil this weekend had a detrimental impact on demand for the British Pound. In protest against Chancellor George Osborne’s latest budget, in which he introduced cuts to disability benefits, ex leader of the Conservatives Ian Duncan Smith resigned. As a vocal supporter of a ‘Brexit’, investors fear that the popularity he is likely to gain for his resignation will translate into votes for the UK to leave the EU.
Also adding to Sterling headwinds was the Confederation of British Industry (CBI) which stated that a ‘Brexit’ could cause 950,000 job losses by 2020. Carolyn Fairbairn, director-general of the business lobby, also argued that the UK economy will see reduced growth outside the EU. ‘The economy would slowly recover over time but never quite tracks back to where it would have been. Leaving the EU would mean a smaller economy in 2030.’
It should be noted, however, that the CBI is an EU funded organisation. This means they will be naturally biased towards EU membership. What’s more, CBI campaigned for the UK to join the Eurozone when the Euro was being introduced, claiming the UK economy would suffer greatly if it didn’t. This transpired to be an incorrect prediction.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.8952.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast to Rally despite US Dollar Strength
Despite the fact that the US Dollar strengthened versus most of its major peers today, with many analysts speculating that last week’s dovish comments from the Federal Reserve were an attempt an jawboning, the Australian Dollar advanced versus most of its currency rivals.
The appreciation can be linked to improved market sentiment after the Shanghai Composite Index ended the Asian session close to 2.2% higher. ‘The state doesn’t want the market to decline and they want to see buying from investors so we’ve seen them loosen their grip on margin lending,’ said Wang Zheng, Shanghai-based chief investment officer. ‘There’s no big negative news now as the top priority for the regulator is to stabilise the market. There will be no radical reforms.’
The ‘Aussie’ (AUD) also found support from China’s economic data. Although the MNI Business Sentiment Indicator remained below the 50 mark that separates growth from contraction, the report showed an increase in production and employment.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 1.8886 during Monday’s European session.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Inflation Data in Focus
During the Australasian session the GBP/AUD exchange rate is likely to fluctuate in response to Australia’s House Price Index and a speech from Reserve Bank of Australia Governor Glenn Stevens. However, as we move into the London session the GBP/AUD conversion rate is far more likely to see volatility in response to British inflation data. Any sign that inflation has advanced will likely be very supportive for the UK Pound. It is fair to say, however, that political uncertainty may continue to overshadow domestic ecostats.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate reached a high of 1.9088 during Monday’s European session.
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