GBP/AUD Exchange Rate Strengthens Thanks to Hopes for Resolution of Irish Border Issue
Reports that UK officials are preparing new plans for the avoidance of a hard Irish border helped to boost the Pound to Australian Dollar (GBP/AUD) exchange rate once again.
Although markets were not yet privy to the details of the plans this was still enough to give the Pound (GBP) some encouragement.
As the future of the border between the Irish Republic and Northern Ireland remains the key unresolved issue of Brexit negotiations the prospect of a breakthrough here naturally improved the mood of investors.
However, unless the proposals find approval with Irish and other EU officials the positive impact on GBP exchange rates could prove to be rather short-lived in nature.
Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi, noted:
‘While short on details, the report has further boosted confidence that the UK and EU can find a workable and timely solution to the Irish border issue to support plans for a “smooth & orderly Brexit”. Nevertheless, it still remains a potential banana skin for the Pound in the coming months if intensified Brexit talks do not progress as well as hoped.’
Global Trade Concerns Continue to Limit GBP/AUD Exchange Rate Losses
Renewed jitters over the global trade outlook offered some additional support to the GBP/AUD exchange rate, meanwhile.
Demand for the Australian Dollar (AUD) naturally eased as the threat of the US imposing additional tariffs on China appeared to pick back up.
Given the relative lightness of the Australian data calendar this week the underlying support for the ‘Aussie’ has remained rather limited.
However, AUD exchange rates could find a rallying point on Thursday if February’s private sector credit data paints a positive picture of the domestic outlook.
The direction of the US Dollar (USD) is also expected to influence the GBP/AUD exchange rate ahead of the Easter weekend, as markets continue to speculate over the odds of more aggressive Federal Reserve monetary tightening.
UK Consumer Credit Data Forecast to Provoke Fresh Pound Exchange Rate Jitters
The GBP/AUD exchange rate may gain further positive momentum if the latest UK net consumer credit data proves encouraging.
Any signs that confidence amongst UK consumers is recovering, with the end of the year-long pay squeeze appearing to be in sight, should offer the Pound a fresh boost.
Even so, an uptick in consumer credit may still give the Bank of England (BoE) cause for pause.
Some policymakers have expressed concern in recent months over the increasing reliance on debt amongst domestic households, something which creates a degree of fragility within the economy in the event of a downturn.
Nevertheless, a stronger showing here is unlikely to be enough to materially alter the odds of the BoE raising interest rates at its May policy meeting, somewhat limiting the downside potential of the GBP/AUD exchange rate.
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