Pound to Australian Dollar Exchange Rate Recovering from Morning Dip amid Brexit Speculation
The Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate is recovering from a slump seen during the Asian session, though the Australian Dollar’s (AUD) recent resilience is keeping the Pound (GBP) from recovering too far.
Despite the Australian Dollar firming on global central bank speculation, GBP/AUD still saw strong gains of almost three cents last week.
GBP/AUD opened last week at the interbank level of 1.86, and closed the week at the level of 1.89. It was unable to hold last week’s mid-week high of 1.90, which was also the pair’s best level since the 2016 Brexit vote.
The Pound to Australian Dollar exchange rate has slipped from its weekend levels so far today, but could the pair resume its advances? If the new Brexit deal passes through UK Parliament in the coming days, it’s certainly possible.
Pound (GBP) Exchange Rates Avoid Major Losses on Hopes for Brexit Deal to Pass
The Pound (GBP) has been on a non-stop roller-coaster since last week, when the UK government successfully negotiated a new Brexit deal with the EU.
Sterling strengthened when the deal was reached, but strength was limited amid concerns about a lack of domestic support for the deal.
Sterling briefly weakened this morning as investors reacted to the weekend’s news that parliament’s meaningful vote on the Brexit deal had been delayed into sometime this week.
However, the government plans to hold its meaningful vote today, and there is speculation that it has the support it needs for the deal to pass. This is keeping Sterling buoyed for now.
Deutsche Bank's Jim Reid: "The next 36 hours will be absolutely crucial in the whole Brexit saga…. hang on… I’m sure we’ve said that about 12 times in the last year."
— Oscar Williams-Grut (@OscarWGrut) October 21, 2019
Australian Dollar (AUD) Exchange Rates Resilient on Global Trade and Central Bank Speculation
A combination of factors has left the Australian Dollar (AUD) as one of the more appealing major currencies in the past week.
The trade-correlated ‘Aussie’ has been primarily supported by hopes for progress in US-China trade relations, as well as speculation that the Federal Reserve could continue to cut US interest rates as the US economic outlook worsens.
Alongside these global factors, the Australian Dollar has also seen continued support from recent domestic news.
Australia’s latest job market results beat forecasts and softened Reserve Bank of Australia (RBA) interest rate cut bets.
Amid Fed rate cut bets, the perceived monetary policy divergence between the RBA and Fed is lightening, keeping the ‘Aussie’ appealing.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook Depends on Brexit Developments
The next few days are going to be pivotal for the Brexit process, the Pound (GBP) outlook, and markets as a whole.
This afternoon, House Speaker John Bercow will decide whether or not he will allow the UK government a meaningful parliamentary vote on Brexit today.
If a meaningful vote goes ahead and UK Parliament votes in favour of the new Brexit deal, the Pound would see a surge in demand as no-deal Brexit fears would be replaced with soft Brexit hopes.
However, it is uncertain if Bercow will allow the vote to go ahead, or if the government has the votes it needs to pass the deal.
If the deal is blocked, no-deal Brexit fears may rise slightly. However, analysts generally predict it would make a fresh delay to the Brexit process more likely.
US-China trade developments and Fed rate cut bets could drive the Australian Dollar (AUD), but overall the Pound to Australian Dollar (GBP/AUD) exchange rate’s movement will be dominated by Brexit news in the coming sessions.