GBP/AUD rates fell by almost three cents towards the end of last week, with the Pound falling from above 1.77 to almost 1.74 at the low point.
|Currency Pair||% Change in 1 month||Difference on £200,000|
Whilst economic data emanating from Australia has improved of late, with Retail Sales figures and trade balance figures showing some improvement, the recent fluctuation on GBP/AUD can more likely be defined by investors’ concerns over the UK’s impending Brexit and the impact it will have on the UK economy.
Sterling has received some support following UK Prime Minister Theresa May’s deal with the EU, after months of hard-line negotiations.
This good feeling was short-lived following the release of a series of Brexit impact papers on the negative implications of Brexit on the UK economy, along with multiple “leaked” Westminster sources, which claim it is looking increasingly unlikely that her fellow MP’s would vote favourably on what they considered unsatisfactory agreement.
When we consider that the Pound was struggling to make inroads towards 1.80 even prior to this, these recent developments are unlikely to drive market confidence sufficiently for us to see GBP return towards this level over the coming days.
If UK Prime Minster Theresa May fails to convince her fellow MP’s to vote in favour of the current proposal, it looks very likely that a no-Brexit deal will be the ultimate outcome. This would in my opinion also make her position as PM untenable, which then adds another level of uncertainty to proceedings.
How these various outcomes will affect the Pound's value are yet to be fully understood but a no-deal scenario is likely to put some significant pressure on GBP in my opinion.
This is likely to cause some concern for those clients looking to execute a GBP/AUD exchange this week, although there are still on-going issues surrounding the Australian economy, which could also handicap the AUD to some extent.
The AUD has also struggled to gain much support of late. The now well documented trade standoff between the US & China has put the Australian economy under pressure, due to the strong trade relationship between Australia & China. With China’s demand for Australia’s raw materials softening, investors have been shying away from the riskier AUD and moving their funds back into safer haven currencies such as the USD or CHF.
Looking ahead, unless the talks between us President Donald Trump and his Chinese counterpart Xi Jinpingh help cool the current trade war between the two nations, the AUD could remain significantly handicapped for the foreseeable future.
With commodity-based currencies such as the AUD relying heavily on global growth to prosper, investors will be looking for the global markets to improve, before making a return. Any spike in global trade could help support a rise for the AUD and this in itself could help drive its value against the Pound, especially if the UK Government fail to rubber stamp the UK’s final withdrawal agreement with the EU.
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