The Pound has traded against the Australian Dollar at the lowest rate of 2017 since April recently. This has been triggered by disappointing news about the UK’s level of economic growth.
Pound Sterling Predicted to Remain Weak if GDP Slows
Looking ahead, the Pound may continue to struggle against the Australian Dollar on UK GDP data.
After the uninspiring Q2 UK GDP results, it remains unlikely that the UK will see a sudden surge in national economic growth.
Highlighting the slowing-effect of the ongoing Brexit process, Berenberg Bank Senior UK Economist Kallum Pickering has said;
‘Since the Lehman recession, the UK has sat comfortably at the top of the G7 growth league. But whereas growth has accelerated significantly so far this year in continental Europe and many emerging markets, the UK is missing out.
While the downside risks from the Brexit vote have not yet played out in a major way, the uncertainty stemming from Brexit is leading to caution in all areas of spending and policy that have long-term implications.
The UK would probably be growing at 2.5% or above this year were it not for Brexit, with strong gains in real wages and more business investment. We forecast real GDP growth of 1.6% in 2018 and 1.7% in 2019’.
The second round of Brexit negotiations started relatively recently, so signs of progress could go some way to decreasing Brexit fears.
Additionally, if it looks like the UK can secure some favourable trade deals after leaving the EU then Sterling may also appreciate on rising trader optimism.
Australian Dollar Outlook: RBA Statements Remain Strong AUD Influencers
The latest Australian Dollar weakness has been caused by statements from Reserve Bank of Australia (RBA) officials.
While expectations earlier in 2017 had been for an RBA interest rate hike, recent statements from policymakers have lowered the chances of a near-term increase.
In particular, Governor Philip Lowe spoke on July 26th and essentially dismissed the idea of a near-term interest rate cut or hike.
While talk of no cut is beneficial, downplaying the idea of a 2017 hike has damaged the Australian Dollar.
If policymakers start to change their minds and advocate raising RBA interest rates in the future, the Australian Dollar could make significant gains against the Pound.
Among the factors that may trigger an RBA change of heart are higher national inflation, as well as a faster pace of wage growth.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.6476 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.6067.
Comments are closed.