GBP/AUD Exchange Rate Punished by No-Deal Brexit Jitters
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning as investors grow increasingly pessimistic on the chances of a Brexit deal.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7971, down roughly 0.5% from this morning’s opening rate.
Pound (GBP) Slumps as Brexit Deadline Looms With No Deal in Sight
The Pound (GBP) is retreating against the Australian Dollar (AUD) and majority of its other peers this morning amid heightened Brexit jitters ahead of Boris Johnson’s self-imposed deadline tomorrow.
According to a report from Reuters, EU leaders are expected to deem progress in post-Brexit trade talks with the UK as ‘still not sufficient’ enough for a deal, when they meet at a summit on Thursday.
— Reuters UK (@ReutersUK) October 14, 2020
This is of particular concern to GBP investors as Thursday also marks Boris Johnson’s self-imposed deadline, following which he has threatened to walk away from negotiations if a deal is not in sight.
Given the EU’s reported position on the progress of talks, and France’s apparent unwillingness to budge on the issue of fishing rights, this would indicate that the UK is now well and truly on the path towards a no-deal Brexit.
However, the Pound’s losses so far today have been relatively modest in scope in light of the risk of a no-deal Brexit.
This suggests there is still some optimism that a deal could be found at the eleventh hour, or that Johnson will be willing to offer a little wiggle room on the deadline.
Australian Dollar’s (AUD) Gains Capped by China Coal Row
Meanwhile, while the Australian Dollar (AUD) is rallying against the Pound (GBP) this morning, it is struggling to replicate this in broader trade.
This comes as AUD investors grow increasingly unnerved by reports that China has banned Australian coal imports, in what looks to an escalation of diplomatic tensions between the two nations.
While the Australian government is still seeking clarification from Beijing over the issue, the South China Morning Post reports that several major Chinese steel mills have already begun diverting orders of Australian coal.
This is of major concern to AUD investors as coal is Australia’s second largest export, with China being the largest importer of Australian coking coal.
GBP/AUD Forecast: More
Looking ahead, it’s safe to assume that Brexit will continue to dominate movement in the Pound to Australian Dollar (GBP/AUD) exchange rate through the latter half of the week.
While additional pressure on GBP exchange rates looks likely in light of the current risks of a no-deal Brexit, there remains plenty of upside potential in Sterling should a last minute deal be found.
In the meantime, the Australian Dollar may be forced to relinquish some ground in overnight trade as Australia’s latest jobs report is expected to show that domestic unemployment rose to 7.1% in September.