The Pound to Australian Dollar (GBP/AUD) exchange rate fell sharply last week, as fears of a no-deal Brexit rocked Sterling sentiment.
What’s Been Happening: Pound Nosedives as No-Deal Risks Surge
A clear GBP selling bias prevailed last week, with the Pound coming under considerable pressure due to fears the UK was hurtling toward a no-deal Brexit.
This resulted in modest losses in the GBP/AUD exchange rate through the first half of the week, before crunch talks between Boris Johnson and European Commission President, Ursula von der Leyen on Wednesday evening failed to deliver a much-needed breakthrough.
The sell-off then through the second half of the week, with Johnson piling more pressure on Sterling by suggesting it is ‘looking very, very likely’ a trade deal would not be agreed, ahead of what was billed as the final weekend of talks.
The Australian Dollar, meanwhile enjoyed some considerable support last week, as the appeal of the risk-sensitive currency was buoyed by hopes for more US stimulus as well as the approval of the Pfizer vaccine by Canada and the US.
Three Things to Watch Out for This Week
1. Brexit Headlines
The Pound has mounted a convincing comeback so far this week after the UK and EU agreed to extend Brexit talks, but unless a breakthrough can be found soon this rally could prove short-lived.
2. BoE Policy Outlook
Also set to influence Sterling sentiment this week will be the conclusion of the Bank of England’s (BoE) final policy meeting of the year, with GBP investors keeping a close eye on the bank’s outlook for 2021.
3. Australian Unemployment Figures
For AUD investors the spotlight this week will no doubt be on Australia’s latest jobs report, with the ‘Aussie’ likely to face some headwinds in the second half of the week if domestic unemployment rose again in November.
GBP/AUD Forecast
Looking ahead, its likely we will see more volatility in the GBP/AUD exchange rate this week as the extension of Brexit talks give plenty of room for more drama.