GBP AUD Exchange Rate Lacks Drive but ‘Aussie’ Pulls Back from Best Levels
The Pound Sterling to Australian Dollar (GBP AUD) exchange rate is holding higher today, despite a lack of strong Pound (GBP) appeal. Brexit hopes and the Australian Dollar (AUD) sliding back from recent highs are both keeping the pair buoyed.
After opening this week at the interbank level of 1.80, GBP/AUD spent most of the week trending with an upside bias. Markets were hesitant to let GBP/AUD fall below this key level.
GBP/AUD briefly recovered last week’s losses, hitting a weekly high of 1.82. However, the pair trended higher in the region of 1.80 at the time of writing on Friday.
Today’s Australian data had little impact on the Australian Dollar (AUD) outlook, but it did make it easier for the Pound to Australian Dollar exchange rate to hold some gains.
Pound (GBP) Exchange Rate Appeal Limited as Brexit Uncertainties Persist
Market sentiment on the Pound has been highly mixed this week. Hopes that the UK and EU are days away from a Brexit deal are helping Sterling to avoid losses. However, no-deal Brexit fears persist and are limiting gains.
UK-EU Brexit negotiations are now continuing well into December. Reportedly there are still major gaps on issues like fisheries.
Markets believe a deal is likely, but the perceived risk of a no-deal Brexit is worsening. According to Marshall Gittler, Head of Investment Research at BDSwiss Group:
‘It’s conceivable that they don’t come to any agreement before the transition period ends on Jan. 1 and continue negotiating some sort of trade deal even after the UK has crashed out with no deal,
I expect Sterling to remain volatile indefinitely,’
Australian Dollar (AUD) Exchange Rates Steadying after Strong Performance
The Australian Dollar has been performing strongly in recent weeks. As global coronavirus vaccine optimism rises and investors become more hopeful about US fiscal stimulus again, the risk-correlated Australian Dollar is becoming more appealing.
Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, said the ‘Aussie’ is taking a break before climbing higher:
‘AUD/USD has taken out all nearby resistance levels and but the daily RSI has not yet confirmed the break higher. We would allow for some near term consolidation and today will just stand aside’
Australia’s fairly solid economic data has also been supporting AUD lately. Today’s Australian retail sales report fell short of expectations, but overall Australian data has painted an optimistic picture for Australia’s recovery from the coronavirus pandemic.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Gains May Be Short-Lived
The Pound to Australian Dollar exchange rate may struggle to keep advancing unless there are solid Brexit developments soon.
Investors will be hesitant to buy the Pound much without signs that a Brexit deal is becoming more likely or is close to actually being reached.
With less than a month until the end of the Brexit transition period, Brexit uncertainty will only see higher and higher focus for investors.
The Pound could instead be knocked back again if no-deal Brexit fears intensify. This could be caused by tensions in negotiations as well.
GBP/AUD may also give back some ground if the Australian Dollar’s bullishness resumes.
The Australian Dollar outlook remains optimistic amid pandemic recovery hopes and solid Australian data.
Next week’s Australian confidence stats from November and December could push the Pound to Australian Dollar exchange rate even lower if they impress.