AUD/GBP Advances on Thin USD Trading Volume

The Australian Dollar has been able to avoid depreciation today on the back of negative news thanks to closed US markets undermining US Dollar strength. The AUD/GBP exchange rate has advanced by around 0.7% to trend around 0.6146; near to a three-year high.

Closed US Markets Buoy US Dollar despite Strong Warnings over Domestic Economy

With the US markets closed in celebration of Columbus, thin trading volume for the US Dollar has allowed the Australian Dollar to make bullish gains. This is despite the fact that there have been several negative developments that should have weighed on AUD/GBP exchange rates.

Citi’s Australian economists have used recent data covering five key metrics of the economy to create a ‘bubble meter’ and it is currently showing the economy is in downturn for the first time since the year 2000. According to Citi, the index is near bust territory thanks to the slowdown in mining investment and a deflationary shock thanks to the reversing terms of trade.

At the same time, a separate report from ratings agency Moody’s has identified the sector as being a significant risk to Australia’s banks. The country’s lenders are facing growing settlement risk from the oversupply of apartment buildings in key cities; the risk that buyers who have placed a deposit are then unwilling or unable upon completion of the building to settle the outstanding balance.

GBP Exchange Rates Slump as Theresa May Dashes Hopes of Parliamentary Vote on Brexit

Fears of a ‘Hard Brexit’ have increased further thanks to the latest comments from Theresa May. The Prime Minister has firmly ruled out the possibility of Parliament being afforded a vote on the Brexit referendum, dashing the hopes of many investors.

Not only had some hoped that giving MPs a vote would mean they could prevent the government going ahead with a ‘Hard Brexit’, some in the markets were still holding out hope that Parliament could vote to block Brexit altogether.

May’s latest comments have further increased market concerns over the impact of a complete break from the European Union upon the economy of the United Kingdom. The Confederation of British Industry (CBI) warned that the government’s insistence upon firm anti-immigration rhetoric of recent days could damage the UK’s open economy.

Meanwhile, the British Retail Consortium warned that prices would rise sharply for consumer staples if the government turns its back on the single market and instead attempts to trade using World Trade Organisation rules.

AUD/GBP Exchange Rate Forecast; Empty UK Data Docket to Leave AUD Dominant?

While the US Dollar will be back trading tomorrow, a thin spread of US data could leave the Australian Dollar free to respond to domestic ecostats. The NAB business conditions, home loans, investment lending and value of loans figures are all due tomorrow. Home loans in August are forecast to have shrunk -1.5%, although this represents an improvement upon July’s decline of -4.2% so could prove supportive for AUD.

There is virtually nothing on the UK’s data calendar over the next few days; tomorrow’s BRC sales are unlikely to shift the Pound considering even bullish PMIs were unable to shift Sterling last week.

At the time of writing, the Australian Dollar Pound Sterling exchange rate trended in the region of 0.6142, while the Pound Sterling Australian Dollar exchange rate trades at around 1.6266.