GBP/AUD Exchange Rate Undermined by Brexit Uncertainty
The Pound to Australian Dollar (GBP/AUD) exchange rate has fallen sharply this morning in response to fresh Brexit jitters.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8084, down roughly 0.6% from this morning’s opening rate.
Pound (GBP) Retreats as Barnier Pours Cold Water on Brexit Hopes
The Pound (GBP) finds itself on the defensive this morning, erasing much of yesterday’s gains amidst fresh Brexit uncertainty.
Reports on Tuesday suggesting that talks between the UK and EU had entered the so-called ‘tunnel’ stage of intensive negotiations, which had prompted GBP exchange rates to surge late in the day.
However, Sterling has now relinquished most of these gains, after the EU’s Chief Brexit Negotiator Michel Barnier stated that talks remain stuck on the issues of fisheries, governance, and a level playing field.
It appears the four day tunnel has failed. Barnier has just reported back to EU ambassadors in Brussels that "a deal hangs in the balance". "Differences still persist on the three main issues".
— Tom Newton Dunn (@tnewtondunn) December 2, 2020
Barnier is also reported to have told EU officials that a Brexit deal may not be found as both sides remain reluctant to compromise any further on these issues.
The news is also offsetting the announcement that the UK is the first country to have approved the Pfizer/BioNTech coronavirus vaccine for use, which may have otherwise helped to bolster the Pound this monring.
Australian Dollar (AUD) Bolstered by Stronger-than-Expected GDP Release
At the same time, the Australian Dollar (AUD) is striking higher this morning, following the publication of Australia’s latest GDP figures during the Asian trading session.
According to data published by the Australian Bureau of Statistics (ABS), Australia’s economy returned to growth in the third quarter, with the economy expanding by 3.3%.
This was up from a 7% contraction in Q2 and easily beat forecasts for a more modest 2.6% expansion.
Speaking ahead of the GDP release, Philip Lowe, Governor of the Reserve Bank of Australia (RBA) predicted that Q4 growth is likely to be positive as well.
Lowe, said:
‘We are now expecting GDP growth to be solidly positive in both the September and December quarters. And then, next year, our central scenario is for the economy to grow by 5 per cent and then 4 per cent over 2022.’
However, Lowe also warned of challenges ahead, as he suggested that unemployment is likely to continue to climb and both wage growth and inflation will continue to undershot targets.
GBP/AUD Exchange Rate Forecast: Brexit to Remain in the Spotlight
Looking ahead to the second half of the week, is looks safe to assume that movement in the Pound to Australian Dollar (GBP/AUD) exchange rate will continue to be dominated by Brexit developments.
This could leave Sterling vulnerable to additional losses if headlines remain broadly negative, with GBP investors likely to grow increasingly unnerved as the risks of a no-deal Brexit rise.
Conversely the Pound is poised to skyrocket should the UK and EU manage to actually reach a deal.
In the meantime, the focus for AUD investors will be on Australia’s latest trade balance figures, where another expansion in the country’s trade surplus could help to bolster the ‘Aussie’.