GBP/AUD Exchange Rate Rises in Lead-up to Article 50 Extension Vote

Pound Australian Dollar (GBP/AUD) Exchange Rate Rises ahead of Article 50 Extension Vote

UPDATE: The Pound Australian Dollar (GBP/AUD) exchange rate has remained volatile over the course of the day, and is currently trading up around 0.3%.

The pairing is currently trading at an inter-bank rate of AU$1.8820.

MPs are due to vote on a motion to seek an extension of Article 50 soon, as well as an amendment on whether to hold a second referendum.

The volatility within Sterling is likely caused by the dark cloud that is the risk the UK could still crash out of the European Union without a deal on 29 March.

Commenting on the possible outcome of today’s vote, Analyst at City Group, Ken Odeluga said:

‘Some senior EU officials are dropping barely veiled signals about a ‘long extension’. The type that could pave the way for the UK to remain within the union.

‘Such comments could deter pro-Brexit MPs from opting for a short Article 50 delay tonight.’

Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as No-Deal Brexit Risk Reduced

This morning, the Pound Australian Dollar (GBP/AUD) exchange rate rose, and the pairing is currently trading at an inter-bank rate of AU$1.8790.

Sterling has been buoyed by the risk of a no-deal Brexit being reduced following a vote in the House of Commons on Wednesday evening.

MPs voted to reject a no-deal under any circumstances.

This meant the government’s original motion that stated the UK should not leave the European Union without a deal on 29 March was changed at the last minute.

However, the vote is not legally binding, and under current law the UK could still leave the EU without a deal on 29 March.

Australian Dollar (AUD) Slips despite Highest Consumer Inflation Expectations in Nine Months

The Australian Dollar (AUD) struggled to make gains on Sterling (GBP) despite a better-than-expected Australian consumer inflation expectations.

March’s figure showed that inflation expectations rose to 4.1%.

This was the highest consumer inflation expectations since June 2018, however this was overpowered by Brexit optimism.

Trump ‘In No Rush’ to Make US-China Trade Deal

Statements from US President Donald Trump on Wednesday likely did little to aid the risk-sensitive Australian Dollar (AUD).

Trump said he was in ‘no rush’ to complete a trade deal between the US and China.

The US President and his Chinese counterpart, Xi Jinping, were expected to hold a summit at Mar-a-Lago in Florida later this month, although a date has not been set.

While indicating that he thought a meeting between himself and Xi was still likely, the President said:

‘I think things are going along very well – we’ll just see what the date is. I’m in no rush. I want the deal to be right […] I am not in a rush whatsoever. It’s got to be the right deal. It’s got to be a good deal for us and if it’s not, we’re not going to make that deal.’

Sterling (GBP) Rises despite OBR Slashing Growth Forecast to 1.2%

Wednesday afternoon saw the UK Chancellor Philip Hammond pledge to spend a £26.6bn Brexit ‘war chest’ to prop-up the economy if MPs voted in favour of leaving the EU at the end of March without a deal.

The Chancellor warned that there would be a ‘significant’ blow to the economy in the short term if there was a disorderly Brexit.

Meanwhile, the Office for Budget Responsibility (OBR) slashed its UK growth forecast from 1.6% to 1.2%.

This is the weakest growth forecast since 2009, although it didn’t prevent the Pound Australian Dollar (GBP/AUD) exchange rate from rising.

Pound Australian Dollar Outlook: Will GBP/AUD Exchange Rate be Hit if MPs Vote for Article 50 Extension?

This evening, it is likely the Pound (GBP) will see further volatility as MPs vote on whether to ask the EU for permission to extend Article 50.

The government is expected to ask for an extension until 30 June to enable them to pass the appropriate legislation.

If MPs vote in favour of this, the Pound could rise against the Australian Dollar (AUD).

As there is a lack of further Australian economic data, there could be movement in the ‘Aussie’ if there are further developments in US-China trade negotiations.

If there are further signs from President Trump that there is no rush to make an agreement with China, the Pound Australian Dollar (GBP/AUD) exchange rate could rise as risk-appetite decreases.

Millie Empson

Contact Millie Empson