GBP/AUD Slips from One-Week High as EU ‘Unconvinced’ by Boris Johnson’s Brexit Proposals

GBP/AUD Exchange Rate Muted as Brexit Remains in Focus

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning after the EU’s lukewarm response to Boris Johnson’s Brexit proposals.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8272, virtually unchanged from this morning’s opening rate.

Pound (GBP) Flat as Brexit Proposals ‘Fall Short’

The Pound (GBP) is struggling to find momentum this morning as Boris Johnson’s Brexit plans failed to resonate with the EU.

This comes after Sterling roared higher on Thursday, driven in part by Johnson’s infectious optimism as he presented his Brexit plans to MPs in parliament.

However the upswing in the Pound proved to be fleeting, with GBP exchange rates retreating again overnight as the EU failed to share in Johnson’s optimism.

Several EU leaders have expressed doubts over the proposals, with the president of the European Council, Donald Tusk suggesting the EU is ‘open but not convinced’.

The central sticking point appears to remain the issue of the Irish border, with Irish PM Leo Varadkar stating Johnson’s plans for minimal border checks ‘fall short in a number of aspects’.

While this is not a flat out rejection of Johnson’s plans, the increasingly narrow timeframe in which the two side have resolve their differences is keeping a cap on the Pound.

Johnson’s Europe adviser, David Frost will meet with European diplomats for another round of talks today.

Australian Dollar (AUD) Supported by Upbeat Retail Sales Figures

At the same time, the Australian Dollar (AUD) found support during the Asian session on Friday, following the release of Australia’s retail sales figures.

According to data published by the Australian Bureau of Statistics (ABS), sales grew by 0.4% in August, just short of expectations of a 0.5% expansion.

However with sales growth being revised up from -0.1% to 0% in July, this slight miss failed to dampen AUD sentiment.

The rebound in sales growth will be welcomed by the Reserve Bank of Australia (RBA), whose recent rate cuts were partly aimed at boosting consumer spending.

GBP/AUD Forecast: More Brexit Driven Volatility Ahead?

Looking to next week’s session, is likely we will see Brexit developments continue to act as the main catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate.

This may infuse fresh volatility into Sterling as we likely see UK and EU officials continue to spar over the terms of a potential Brexit deal.

There’s the chance for a sharp upswing in GBP exchange rates if we see the two appear to reach some sort of compromise.

On the data front, the publication of the UK’s latest GDP figures could weigh on Sterling sentiment next week as economists forecast the UK economy will have stalled in August.

For AUD investors the focus may be on the release of Australia’s latest business and consumer confidence figures.

This could lead the Australian Dollar to retreat if these indexes reveal domestic sentiment continues to deteriorate.

Matthew Andrews

Contact Matthew Andrews