Sterling Exchange Rates Slip Back Below 1.70 (James Lovick)

AUD GBP Lower Ahead of PMI Data for the UK Economy

The pound is still hovering just below the 1.70 mark for GBP AUD having slipped from a high of 1.7154 earlier in the week. The pound has been largely driven higher after the Trump victory which has proven to be a major boost for sterling exchange rates. The perceived better outlook with a potential trade deal between Britain and the US is the reason in my view for this sterling strength.

What are the main factors driving GBP AUD?

  1. UK Brexit & Politics
  2. US Fed Interest Rate Decision 14th December!

This week in Britain has been largely dominated with the Supreme Court appeal on whether the government must consult parliament before invoking Article 50. Although a verdict is not expected until January the fact that the case has been shown live throughout the entire appeal does give some clues as to the final outcome. The pound has found support as the markets appear to be leaning towards the government losing the appeal at the Supreme Court.

This ultimately may result in a softer Brexit which the markets see as a safer option for the British economy. It is evident that there are still many politicians including ex-Prime Minister Tony Blair who are desperate to push for a softer Brexit and it is this will in my view which is helping to prop up the pound.

The future for the Australian dollar meanwhile is uncertain as so much depends on the next US interest rate decision being held next Wednesday. My view remain that the US Fed will raise interest rates by 0.25% marking a one year anniversary from the last hike. This is likely to be negative for the dollar as there is likely to be a flight of funds to the US dollar where interest rates will potentially be higher. There is likely to be high volatility after the announcement and it has the potential to be a major market mover creating new direction for the Aussie.

Clients who are holding sterling are seeing a very volatile period at the moment which is unlikely to change any time soon although sterling still appears to be on the up. If you would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me on 0044 1494 787 478 and ask one of the team for James. Alternatively, I can be emailed directly on [email protected]