British Pound To Australian Dollar Rate Reverses Brexit Downtrends, Barclays Call RBA Cut In August

The GBP to AUD exchange rate rate had been on a particularly sharp downtrend in recent days, as the impact of the EU referendum weighs heavily on global market sentiment.

The British Pound has appreciated against the Australian dollar today, along with the euro, US dollar and NZ dollar.

The GBP/AUD exchange rate currently trends 0.72 per cent higher in the region of 1.746.

The move higher for sterling vs Aussie comes despite warnings from Barclays of a slowing momentum.

The ‘Brexit’ vote will exacerbate uncertainty in the UK economy, according to analysts at Barlcays.

As reported by ForexCrunch, "Post-Brexit: We Now Expect The RBA To Cut Rates In August – Barclays"

In their latest research note to clients, Barclays wrote;

‘The UK economy is likely to enter a period of stagflation… This decision to leave the EU, in our view, will exacerbate current elevated levels of uncertainty and thus amplify already slowing economic momentum.’

Latest Australian Dollar Exchange Rates

This comes as the fourth successive day of down-trending for the GBP/AUD exchange rate, which has partly been caused by political developments.

In addition to an accelerated leadership contest coming from the Conservatives, Labour has been making headlines with a number of high-profile resignations against current Leader Jeremey Corbyn.

There has been speculation that the Bank of England (BoE) could be prompted to cut interest rates in the wake of the Brexit result, should the domestic economy be hit by the negative consequences of a withdrawal from the EU.

This has removed further support from the Pound, with investors spooked by the idea of the BoE returning to an easing bias.

After markets had largely priced in the impact of a vote for the UK to remain in the EU it naturally came as a sharp shock when the result was ultimately revealed to have been in favour of a Brexit.

This prompted the Pound (GBP) to slump sharply across the board ahead of the weekend, as investors scrambled to reduce their exposure to the higher risk associated with this result.

As a result the Pound to Australian Dollar (GBP/AUD) exchange rate plunged to a nineteen-month low, with the ‘Aussie’ benefitting in spite of a general decrease in demand for higher-yielding assets.

Pound Sterling (GBP) Exchange Rates Fail to Recover on Osborne Comments

Comments from Chancellor of the Exchequer George Osborne offered some reassurance to markets on Monday morning, as the Chancellor indicated confidence in the UK economy’s ability to weather the current storm.

However, as Osborne also echoed the opinion that the triggering of Article 50 should be delayed investors were not impressed by the implication of a prolonged period of uncertainty.

Pressure on the Pound remains biased to the downside for the foreseeable future, as researchers at TDS noted:

‘There’s the question of market reaction and whether we’ve seen the worst of the adjustment, or whether there’s more forced selling to come this week as margin calls are made and businesses take the weekend to reassess their GBP exposure.’

Weaker Risk Appetite Muted Australian Dollar (AUD) Exchange Rates' Gains

Generally demand for the Australian Dollar (AUD) has been muted in the aftermath of the UK’s decision, with the US Dollar (USD) on a bullish run and risk appetite largely limitedReserve Bank of Australia (RBA).

With commodity prices increasingly under pressure, however, the Australian economy is expected to see some detrimental impact from the recent shift in market atmosphere.

Brexit Uncertainty Predicted to Maintain Downside Pressure on Pound / Aus Dollar Exchange Rate

The fallout from the Brexit vote is expected to remain the dominant influence on markets in the coming week, and likely beyond, with the political landscape rapidly changing in response to the historic referendum.

Domestic data is likely to be largely overlooked in the near future, with the impact of any positive signs from the UK economy expected to be somewhat muted due to the radically changed outlook of the economy moving forward.

Nevertheless, signs of domestic economic strength could help to shore up the GBP/AUD exchange rate somewhat, particularly if nerves ahead of the Australian election weigh on the appeal of the ‘Aussie’.