The Pound continues to remain at the lower levels against most of the major currencies as the lack of certainty over Brexit remains the prime concern for the UK.
The GBP/EUR rate has picked up at the start of this year taking levels to just over 1.13 for this pair although it struggles to find further support.
Although the first round of Brexit negotiations have been concluded positively the more thorny issue of future trade is yet to be started and this is supposedly where the real challenge lies. In my view this next round of negotiations is likely to be the major driver for Sterling exchange rates throughout 2018 and it should not be underestimated how important these discussions will be.
Events this week that could affect Sterling
UK industrial production numbers are released on Wednesday morning alongside UK trade data. Wednesday also sees the National Institute for Economic and Social Research (NIESR) GDP estimate which is an excellent precursor to the official UK numbers.
UK politics however is likely to dominate the headlines with the Cabinet reshuffle which is taking place in Theresa May’s Government. More changes are expected today and there has been talk of a ministerial position for leaving the European Union without a trade deal. There is likely to be more mileage in this story and there should be an impact on Sterling exchange rates.
The prospect of a no deal scenario is one of the main issues for the Pound at present and any further suggestion that there could be no deal trade deal following Brexit is only likely to hamper the price of Sterling in my view, in the short term at least anyway.
Pound to Australian Dollar forecast
The GBP/AUD exchange rate has dropped substantially over the past couple of months although this is more to do with a change in interest rate expectations down under.
There is a growing view that the Reserve Bank of Australia (RBA) will now look to raise interest rates later this year and follow other global central banks as they try and reverse almost a decade of ultra-loose monetary policy and Quantitative Easing. With this development then any gains for the Pound against the Australian Dollar are likely to be limited.