While the Australian Dollar saw a brief surge in demand on higher risk-sentiment and domestic data last week, the British Pound to Australian Dollar exchange rate rebounded from its worst levels at the end of the week due to some fresh Brexit hopes, as well as fresh market aversion to risk-taking.
After opening last week at the level of 1.8763, GBP/AUD spent most of the week plummeting on fresh no-deal Brexit fears. GBP/AUD briefly touched on a March worst level of 1.8356 on Thursday, before rebounding slightly and trending closer to the level of 1.8547 on Friday.
As a result of Fridayâ€™s rebound, GBP/AUD was able to avoid shedding all of the previous weekâ€™s losses.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Benefits from Brexit Delay Hopes and Weaker Risk-Sentiment
The past week has been another highly volatile one for the Pound, as the Brexit outlook came into question and was shifted multiple times throughout the week.
Sterling spent most of the week tumbling, as the possibility of the UK being unable to reach a solution on Brexit in time for the Brexit date left investors anxious that a worst-case scenario no-deal Brexit was still highly possible.
The EU initially indicated it would not allow an extension to Brexit at all unless Parliament agreed to the governmentâ€™s Brexit deal or an alternative solution by the end of next week. This made Sterling plummet.
The Australian Dollar was able to easily capitalise on these Pound losses, as in the middle of the week the Federal Reserveâ€™s more dovish tone on US monetary policy also made investors more eager to take risks again which benefitted demand for the risky â€˜Aussieâ€™.
Australian Dollar demand was also supported by an unexpected improvement in Australiaâ€™s unemployment rate, which doused market Reserve Bank of Australia (RBA) interest rate cut bets.
However, at the end of the week Pound investors found some relief while the Australian Dollar was knocked lower by fresh market aversion to risk-taking.
The Pound saw a late-week jump in demand when it was confirmed that the EU would allow a no-strings-attached Brexit delay until the 12th of April, much to the brief relief of markets.
Meanwhile, the Australian Dollar was sold as ongoing Brexit chaos, combined with expectations that the Federal Reserve was still comparatively more hawkish than other major central banks, made investors hesitant to keep buying riskier currencies.
Pound (GBP) Exchange Rate Forecast: Another Week of Brexit Chaos Ahead
Next weekâ€™s UK economic calendar will be a little quiet besides UK growth data on Friday â€“ and itâ€™s probably just as well, because Pound investors are likely to once again be highly focused on any and all Brexit developments.
The UK was originally set to formally leave the EU at the end of this week, but it appears that no matter how Brexit unfolds this week the date will be delayed by at least two weeks.
The government intends to hold a third meaningful vote on its Brexit plan, and if it passes this time due to the threat of a no-deal Brexit then the Pound could surge as it would mean that a relatively soft Brexit is confirmed.
Analysts predict the deal is still unpopular though, and if it is blocked for a third time then Parliament will have two weeks to find an alternative solution to Brexit.
If Parliament remains unable to come up with a solution to Brexit over the coming weeks, the Pound could be in for even further losses.
Australian Dollar (AUD) Exchange Rate Forecast: Risk-Sentiment in Focus as US-China Talks Resume
Australiaâ€™s economic calendar will be fairly quiet next week as well. The only notable Australian dataset due for publication throughout the week will be Australian private sector credit data from February, due on Friday.
As a result, the Australian Dollar is more likely to be driven by shifts in market risk-sentiment throughout the week.
As a relatively risky trade-correlated currency, the Australian Dollar is unappealing to investors in times of market uncertainty.
With the US and China set to resume major trade negotiations this week, in hopes that the nations will reach some kind of agreement, developments in these talks are highly likely to influence the Australian Dollar.
Brexit chaos has also been influencing risk-sentiment lately, so itâ€™s likely that overall the Poundâ€™s movement will be the biggest cause of Pound to Australian Dollar exchange rate movement in the coming week.