GBP/AUD Exchange Rate Buoyed by Brexit Deal Hopes
The Pound to Australian Dollar (GBP/AUD) exchange rate is trending higher this morning amidst renewed hopes for a UK-EU post-Brexit trade deal.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8438, up roughly 0.3% from this morning’s opening rate.
Pound (GBP) Buoyed by Barnier’s Comments on Legal Text
The Pound (GBP) is ticking higher against the Australian Dollar (AUD) and majority of its other peers this morning following comments from EU Chief Brexit Negotiator Michel Barnier.
Speaking on Wednesday, Barnier suggested that a post-Brexit trade deal is ‘within reach’ if the two sides work together to solve the last few remaining issues.
"Our doors will always remain open"
— Bloomberg Brexit (@Brexit) October 21, 2020
‘An agreement is within reach if both sides are willing to work constructively, compromise and working to make progress on the basis of legal texts and if we are able in the coming days to resolve the sticking points.’
Perhaps most importantly however was Barnier’s comments suggesting the EU is ‘discuss all subjects on basis of legal text’.
The UK government had previously indicated it would not continue trade talks with the EU unless the terms of the legal text were up for negotiation, and as such this bolstered Sterling sentiment on hopes for the resumption of talks.
Australian Dollar’s (AUD) Supported by US Stimulus Optimism
At the same time, the Australian Dollar (AUD) remains well supported this morning as the risk-sensitive currency capitalises on the upbeat market mood.
This comes on the back of renewed US fiscal stimulus optimism, after US House Speaker Nancy Pelosi walked back her Tuesday deadline amid signs of positive progress towards a deal.
Fiona Cincotta, Market Analyst at City Index, said:
‘As the White House and Congress move closer towards a new Covid rescue package demand for riskier assets has picked up whilst the safe haven US Dollar is coming under pressure.
‘With Trump saying that he is prepared to accept a larger bill, talks will continue past House Speaker Nancy Pelosi’s soft Tuesday deadline.’
The oft delayed stimulus package is desperately needed to help sustain the rebound in the US economy, which is thought to be vital to the global recovery.
GBP/AUD Forecast: Brexit and Coronavirus Concerns to Drive Markets
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate looks to face volatility through the second half of the week as Brexit and coronavirus uncertainty remain a key catalyst of movement.
Brexit will of course predominately impact Sterling sentiment, with GBP exchange rates vulnerable to losses if the UK government fails to accept the EU’s latest olive branch.
GBP investors are also likely to remain highly conscious of UK coronavirus developments, amidst speculation England could be headed towards a second ‘circuit breaker’ lockdown.
However these coronavirus concerns will undoubtedly spill over into broader trade, potentially capping any additional upside in the Australian Dollar.