Brexit Pessimism Drags Down Pound as ‘Meaningful Vote’ Approaches

GBP/AUD Slips as UK Parliament Enters Final Hours before Brexit Vote

UPDATE: Over the course of the day the Pound has slipped against the Australian Dollar as the UK Parliament entered the fifth and final day of debate over Theresa May’s Brexit withdrawal agreement.

It is expected that May will lose the vote scheduled for later on in the evening as she faces her agreement rejected by opposition parties, the Democratic Unionist Party (DUP) as well as an estimated 100 members of her own party.

That there will likely be volatility in the Pound Australian Dollar (GBP/AUD) pairing regardless of the outcome of the vote, depending on how many votes May loses by.

If the deal is rejected by MPs, the Prime Minister has three sitting days to return to Parliament with her ‘Plan B’, which some have suggested will result in her going back to Brussels to continue negotiations.

GBP/AUD Remains Buoyed Despite Predictions of a US-China Trade Agreement

UPDATE: The Pound Australian Dollar (GBP/AUD) exchange rate remains buoyed despite the prediction from US President Donald Trump that the US and China will reach a deal, which would then spark a rise in risk-sensitive currencies such as AUD.

Trump stated: ‘We’re doing very well with China, I think that we are going to be able to do a deal with [them] … China wants to negotiate.’

A statement from Theresa May in which she warned that failure to approve her Brexit agreement could result in the UK remaining in the European Union has kept the Pound Buoyed throughout the day, as it raised the hopes of markets that Brexit could be reversed or softened.

Today: Australian Dollar (AUD) Weighed Down By Weak Chinese Figures

The Pound Australian Dollar (GBP/AUD) exchange rate rose over the course of Monday morning, as weak Chinese data weighed heavily on the ‘Aussie’.

The value of year-on-year Chinese imports and exports contracted rather than the expected increase, leading to broad based ‘Aussie’ weakness which allowed GBP/AUD to rise.

Parliament entered its fourth day of Brexit debate today, with Prime Minister Theresa May stating that she would not be extending Article 50, and that the European Union had rejected her request for a time limit on the Irish backstop.

Currently the GBP/AUD exchange rate is trading at AU$1.7854 on the inter-bank market.

Last Week: Pound Sterling Australian Dollar (GBP/AUD) Rises on Article 50 Delay Rumour

The Pound (GBP) kicked off the week in a position of strength as the Australian Dollar (AUD) fell following the release of the AiG performance of manufacturing index, which revealed a contraction to 49.5 in December.

A decrease in global risk sentiment saw the ‘Aussie’ benefit, which was further boosted by the US and China engaging in a third, unscheduled day of trade talks in Beijing.

Wednesday revealed that Australian building permit figures had slid to a five-year low, which saw the GBP/AUD pairing rise before subsequently falling again.

Thursday saw the pairing plummet as UK like-for-like retail sales figures were released, showing that retailers had suffered their worst Christmas in a decade despite slashing prices.

The Australian performance of construction index for December showed the construction market had also contracted further to 42.6, although this did little to prevent the Pound from sliding.

November’s seasonally adjusted retail figures showed that retail sales in Australia had increased by 0.4%, higher than expected that further strengthened the ‘Aussie’, although this boost is expected to have been a result of Black Friday and Cyber Monday sales.

Friday morning saw the Pound spike, as rumours circulated that Britain would seek to delay the departure from the European Union in March.

The pairing still remained buoyed despite the claims by Prime Minister, Theresa May’s spokeswoman denying these claims.

A better-than-forecast increase in British GDP for November to 0.2% also likely caused the Pound to rise against AUD earlier in the morning.

GBP/AUD Exchange Rate Forecast: Will Consumer Confidence Buoy AUD?

Tuesday will see the ‘meaningful vote’ which is likely to see MPs vote against May’s withdrawal agreement, meaning the Australian Dollar (AUD) is likely to rise against the Pound (GBP).

Mark Carney, Governor of the Bank of England, is due to give a speech Wednesday morning, with the tone of this speech likely to cause the Pound to drop if it is dovish.

Wednesday evening will see the release of the Australian Westpac consumer confidence for January followed by Australian home loans, with the forecast suggesting this figure will fall by -1.5% in November, which may cause the ‘Aussie’ to drop.

The end of the session could see the Pound fall further as retail sales figures for December are set to be released, with forecasts suggesting that sales in December will have slowed down.

Hannah Wilson

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