The Pound to Australian Dollar (GBP/AUD) exchange rate was met by volatility last week, in response to drama over the resumption of Brexit trade talks.
What’s Been Happening: Pound Finds Fleeting Gains as Brexit Talks Resume
The Pound traded in a wide range last week, coming under some initial pressure after Boris Johnson declared that Brexit trade talks with the EU were ‘over’.
But it appears that Johnson may had jumped the gun a little, with the UK and EU agreeing to restart talks after the EU’s chief negotiator Michel Barnier extended an olive branch on Wednesday, propelling the GBP/AUD exchange rate to a near five-month high in the progress.
However, the Pound failed to sustain these gains through the latter half of the week, with the GBP/AUD ultimately closing the week only slightly above its opening levels.
Meanwhile, the Australian Dollar also got off to a poor start last week, with the currency being undermined by rising speculation the Reserve Bank of Australia (RBA) will cut interest rates in November.
An improvement in market sentiment helped to lift the ‘Aussie’ out of the doldrums in the second half of the week however, with investor risk appetite being improved by US stimulus optimism and the approval of a new coronavirus treatment.
Three Things to Watch Out for This Week
1. Coronavirus Developments
Likely acting as a key catalyst of movement in GBP/AUD this week will be renewed concerns over the coronavirus, as a second wave of infections and further restrictions threats to scupper the global recovery.
2. Brexit Headlines
Continuing to dominate investor attention in the UK will be Brexit. Will reports of positive progress help the Pound to recapture its recent highs?
3. Australian Inflation Figures
For AUD investors a key focus this week will be Australia’s third quarter CPI release. Economists are predicting a rebound in inflation, but with a RBA rate cut already priced in any upside in the Australian Dollar may prove limited.
Looking ahead, its likely we will see the GBP/AUD exchange rate continue to trade in a wide range this week as coronavirus and Brexit uncertainty continues to infuse the pairing with volatility.