GBP/AUD Exchange Rate Rangebound, Brexit Negotiations Still Require a ‘Significant Amount of Work’
The Pound Australian Dollar (GBP/AUD) exchange rate held steady today after a week of strong Sterling gains, with the pairing currently trading around AU$1.859.
A more reticent market mood compared with last week’s robust optimism and Pound buying frenzy came as EU Chief Negotiator, Michel Barnier calmed the waters by pausing Brexit negotiations until after an upcoming EU summit on Thursday.
A spokesperson for 10 Downing Street commented:
‘[A] pathway to a deal could be seen, but… there is still a significant amount of work to get there and we must remain prepared to leave on 31 October.’
Mr Barnier further dampened investor confidence by warning the UK had “one last chance” to find a solution to the Irish backstop, putting further pressure on the government to propose a working alternative by the end of the month.
Jean-Claude Juncker, the President of the European Commission, also raised uncertainty over Prime Minister Boris Johnson’s willingness to extend Article 50, saying:
‘It’s up to the Brits to decide if they will ask for an extension. But if Boris Johnson were to ask for extra time – which probably he won’t – I would consider it unhistoric to refuse such a request.’
Sterling traders will be looking ahead to a speech today by Sir Jon Cunliffe, the Deputy Governor for Financial Stability at the Bank of England (BoE). Any dovish comments about the UK’s economic health will likely prove Pound-negative.
AUD/GBP Exchange Rate Holds Steady, Could ‘Aussie’ Rise on US-China Partial Deal?
The Australian Dollar (AUD) failed to gain on Sterling today despite news that US-China trade negotiations had taken a positive turn, with President Donald Trump suggesting a deal might be agreed upon by November.
As China is Australia’s closest trading partner, improved relations between the US and China would markedly improve the global trade-reliant Australian economy.
Christiaan Tuntono, Senior Economist for Asia Pacific at Allianz Global Investors, was sceptical of the upbeat news, saying:
‘We think the ‘substantial’ first-stage trade deal made by Trump with China looks more like a truce than a genuine deal… While this first-stage deal is called a deal, it does not remove the existing tariff burden on US-China trade or reduce the uncertainty faced by businesses in future US-China relationship.’
GBP/AUD Outlook: Brexit Developments to Remain in Focus this Week
Australian Dollar (AUD) investors will pay close attention to tomorrow’s Reserve Bank of Australia’s (RBA) meeting minutes report after the RBA cut interest rates to a record-low of 0.75% last week. Any dovish commentary could weaken market confidence in the ‘Aussie’.
Meanwhile, Sterling traders will be looking ahead to tomorrow’s UK average earnings figure for August which is expected to rise by 3.7% and could potentially buoy the GBP/AUD exchange rate.
Tomorrow will also see the UK’s ILO unemployment rate for August, which is expected to hold steady at 3.8%.
Brexit news will remain in focus this week, with any signs of progress ahead of the EU summit on Thursday likely to increase hopes for a deal by the October 31 deadline. Will we see another buying frenzy on the pound if an agreement can be reached?