GBP/AUD Exchange Rate Rises despite Inconclusive UK-EU Talks
UPDATE: The Pound (GBP) continued to hold onto its gains against the Australian Dollar (AUD) today despite the UK-EU negotiations between the Attorney General, Geoffrey Fox, and the EU’s Brexit Secretary Michel Barnier, ending inconclusively.
A spokesman for the European Commission concluded pessimistically:
‘No solution has been identified at this point that is consistent with the withdrawal agreement including the protocol on Northern Ireland, which as you all know will not be reopened.’
The Australian Dollar, meanwhile, has continued to struggle today with the US-China trade negotiations still on-going without any notable developments, and with the recent signs of a weakening Chinese economy, this is continuing to weigh on sentiment in the ‘Aussie’ today.
GBP/AUD Exchange Rate Rises as Australian GDP Falls below Consensus
The Pound Australian Dollar (GBP/AUD) exchange rate soared today above 0.7% and is currently trading around AU$1.8698.
The Australian Dollar (AUD) fell to a two-month low today following the publication of Australia’s growth figures for the fourth-quarter, which fell below consensus to 0.2%.
Ben Udy, an economist at Capital Economics, concluded pessimistically:
‘Overall, today’s data paint a bleak picture of the Australian economy. And given that the housing downturn and weak business confidence have continued into 2019 we don’t think that weakness was a one-off.’
The Pound managed to gain on the ‘Aussie’ despite talks between the UK and the EU over the Irish backstop failing to make any notable progress. Geoffrey Cox, the Attorney General, and Stephen Barclay, the Brexit Secretary, will be renewing negotiations today with the EU Brexit Negotiator, Michel Barnier.
Any signs of a breakthrough on a legally-binding compromise on the backstop could lend support to Prime Minister Theresa May’s Brexit deal, which, in turn, would prove Pound-positive.
AUD/GBP Exchange Rate Plummets as Chinese Slashes 2019 Growth Forecast
AUD has come under increasing pressure following indications of the Chinese economy also slowing down, with yesterday’s Caixin Services PMI figures for February falling to a worse-than-expected 51.1, drawing it nearer to contraction.
This came after news that Beijing would slash its growth forecast between 6% and 6.5% for 2019, signifying a problematic economy.
Li Keqiang, China’s Premier, commented:
‘We have made a moderate adjustment to our projection on the basis of a thorough assessment of destabilising factors and uncertainties affecting the economic performance.’
GBP/AUD Exchange Rate Rises as Pound Traders Await Irish Backstop Developments
There are no significant UK economic data publications today, with many GDP traders instead focusing on Brexit developments.
Today, however, will see the Deputy Governor for Financial Stability, Sir Jon Cunliffe, of the Bank of England deliver a speech, and with any bullish comments about the UK economy, this could improve the GBP/AUD exchange rate further.
Julian Smith, the chief whip, struck a gloomy note today saying that if MPs rejected Theresa May’s Brexit deal next week, Parliament would force a much softer Brexit, opting to extend Article 50.
Lord Stevenson of Balmacara, the Shadow International Trade Minister, rallied for MPs to get behind the deal, saying:
‘It is surely time for ministers to abandon their red lines and for the government to back this proposal.’
GBP/AUD Outlook: Brexit Developments Remain in Spotlight
‘Aussie’ traders will be looking ahead to the release of the Australian trade balance figures for January tomorrow, and with any signs of improvement, this could be AUD-positive.
Tomorrow will also see the publication of the Australian retail sales figures for January, which are expected to increase.
Sterling traders, meanwhile, will be looking to the publication of the Halifax house prices for February.
The GBP/AUD exchange rate, however, is more likely to be dictated by Brexit developments for the rest of this week, and with any indications that Theresa May’s Brexit deal is gaining more traction ahead of the 12 March vote, this could see the Pound rise further against the struggling ‘Aussie’.