GBP/AUD Exchange Rate Rangebound on Brexit Uncertainty
The Pound to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning amidst a renewed focus on Brexit.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9572, virtually unchanged from this morning’s opening levels.
Pound (GBP) Shaken by First Round of Trade Talks
The Pound (GBP) is struggling to find support this morning, in response to fresh Brexit uncertainty.
As UK negotiators head home after the first round of trade negotiations with the EU, it’s clear that the two sides are deeply divided on a number of key issues.
An agreement with the #UK will be difficult, but possible. A lot more work needs to be done. Looking forward to seeing @DavidGHFrost in London on 18 March.
👇 My closing remarks following the 1st round of negotiations 🇪🇺🇬🇧https://t.co/B4IBg4cXWj pic.twitter.com/gz93GIGziZ
— Michel Barnier (@MichelBarnier) March 5, 2020
This is particularly true regarding how the UK and EU will ensure fair economic competition.
The EU is adamant that the only way to achieve a ‘level playing field’ is for the UK to continue to abide by a number of EU regulations.
However for Boris Johnson’s government such terms are unthinkable, with the PM having repeatedly reject any form of alignment with the EU after Brexit.
Unsurprisingly this is currently weighing on Sterling sentiment, as deep divisions between the two sides point towards the UK facing a no-deal Brexit at the end of the year.
Australian Dollar (AUD) Undermined by Downbeat Retail Sales
Meanwhile, the Australian Dollar (AUD) is on the defensive this morning as markets were left disappointed by Australia’s latest retail sales figures.
According to data published by the Australian Bureau of Statistics (ABS), domestic sales growth contracted 0.3% in January, following a 0.7% decline in December and missing expectations that sales growth would have flat lined.
The slump was largely attributed to Australia’s bushfire crisis, which was at its height at the start of the year.
Further weighing on the Australian Dollar were suggestions that the coronavirus is likely to see this downtrend persist through the months to come.
Callam Pickering, APAC economist at Indeed Australia predicts:
‘Forecasting the impact of coronavirus is naturally difficult and at least so far the number of confirmed cases in Australia is relatively low.
‘But disruptions to supply chains are likely to reduce the amount of available stock for a range of goods, while households are likely to pull back on everything but the necessities.’
GBP/AUD Forecast: All Eyes on UK Budget Next Week
Looking ahead to next week’s session, a key catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate looks to be the publication of the UK’s long awaited Budget.
Having been delayed from November after the General Election was called, expectations for the Budget helped to prop up Sterling through February after the sudden resignation of Sajid Javid fueled speculation his successor, Rishi Sunak would loosen the purse strings at the Treasury.
However, these expectations may need to be re-adjusted in light of the coronavirus, which may necessitate a more conservative Budget as the government seeks to keep funds aside to deal with a possible pandemic.
Meanwhile, the Australian Dollar is likely to remain highly sensitive to coronavirus developments next week, with the currency likely to struggle if resulting market jitters leads a risk-off mood to prevail.