GBP/AUD Exchange Rate Flat amid Heightened Brexit and Election Uncertainty
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning amid concerns over Brexit and UK election risks.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8807, virtually unchanged from this morning’s opening rate.
Pound (GBP) Side-Lined as Markets Await EU Brexit Response
The Pound (GBP) is treading water this morning as markets await the EU’s verdict on whether to grant another extension to Brexit.
Boris Johnson’s attempt to fast-track his Brexit bill through parliament this week was rejected by MP’s on Tuesday, as they sought more time to scrutinise the legislation.
In response Johnson decided to ‘pause’ the bill, a move which essentially made it impossible for the UK to leave the EU with a deal by the 31 October deadline.
As a result the Pound has struggled this week, with EU leaders now having to mull over whether to grant yet another Brexit extension.
Most EU leaders are thought to favour a three-month extension, but France has argued for a short delay in order to keep parliament focused on the deal in front of them.
The EU was expected to deliver its verdict at some point today.
However reports suggest the decision will now be delayed to next week after Johnson announced he will put forward a motion for a general election on Monday.
Brexit is in a Catch-22 as U.K. and EU leaders are each waiting for a decision to be made on the other side before plotting their next move https://t.co/YM6EOHcCkO
— Bloomberg Brexit (@Brexit) October 25, 2019
Australian Dollar (AUD) Muted as US-China Tensions Rise
The Australian Dollar (AUD) is also struggling to find support this morning as signs of rising tensions between the US and China supresses market risk appetite.
This comes in the wake of a speech by US Vice-President Mike Pence attacking Chinese diplomatic and trade policies.
Pence used his speech to criticise the NBA and Nike for ‘kowtowing’ to Beijing, whilst also warning that Chinese policy was becoming ‘more aggressive and destabilising’.
China was quick to fire back, branding his speech as ‘lies’ and criticising the US government for failing to tackle racism and wealth disparity.
Hua Chunying, a spokeswoman for China’s foreign ministry said:
‘The US has already abandoned and cast aside its morality and credibility. We hope these Americans can look at themselves in the mirror to fix their own problems and get their own house in order.’
The latest spat comes as the US and China attempt to settle the terms of a ‘phase 1’ trade deal. with the renewed tension casting doubts that the two powers will be able to reach an agreement and dampening the appeal of the China proxy ‘Aussie’.
GBP/AUD Forecast: Uncertainty to Keep Markets on Edge
Looking ahead to next week’s session, the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to face some volatility as MP’s vote on whether to hold a snap election before Christmas.
This is likely to cast greater uncertainty over Sterling next week especially as it’s likely to influence the EU’s verdict on a Brexit extension.
For AUD investors the focus next week will be on Australia’s latest consumer price index, which are expected to show than domestic inflation remained steady in the third quarter.
While a robust 0.6% expansion in inflation may traditionally have been supportive of the Australian Dollar, it comes amid firming expectations of another rate cut from the Reserve Bank of Australia (RBA) and therefore may fail to resonate with investors.