The Pound continues its rally higher against the Australian Dollar with rates breaking over 1.83 for the GBPAUD pair. The times are changing now that Sterling has made material gains across a basket of currencies including the Australian and New Zealand Dollars. Much of the market movement is coming from a perceived better outlook on Brexit which is helping to lift the price of Sterling. Comments from the EU’s chief Brexit negotiator Michel Barnier suggest that a deal between Britain and the EU is just 6-8 weeks away and this is proving positive for GBPAUD.
There could be some more twists in the story over these coming days though, after it has been reported that 50 Conservative politicians met yesterday to explore avenues to oust Prime Minster Theresa May. A no deal Brexit cabinet meeting will also take place tomorrow and any developments could see considerable market reaction for the Pound. The prospect of a no deal scenario is what is keeping the markets guessing and preventing the Pound from moving much higher than these levels against the Australian Dollar. The Chequers proposal that is being championed by Theresa May is facing major criticism and she may not be able to get the plan through Parliament. As such the next few months could see major volatility as we learn how Brexit will end up and how likely a no deal outcome becomes.
For the Australian Dollar the currency still faces headwinds over uncertainty from the ongoing trade war between the US and China. With President Trump reportedly ready to slap on more tariffs on Chinese goods this leaves the Aussie in a less than comfortable state. The risks of the trade war are yet to be seen but for the moment investors are taking a cautious approach to the Australian Dollar and there could be further Australian Dollar weakness in these coming weeks and months.
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