Concerns over Brexit and China continue to put pressure on GBP and AUD

Will the Brexit extension be confirmed this week, and how could this impact GBP/AUD?

GBP/AUD rates have fallen by almost 5 cents in the past week, with the pound now seemingly struggling to hold its position above 1.80.

This key threshold has been broken this morning, with AUD making further inroads today. Investor confidence in sterling is decreasing.

The pound has been trading above 1.85 against AUD only recently, and at one stage it looked like a move back to 1.90 was on the cards, with a Brexit deal seemingly imminent and pressure on AUD growing due to a slowdown in the Chinese economy.

This wasn’t the first time that confidence over a final deal between the UK & EU proved to be premature, with the Irish border issue currently proving to be an insurmountable hurdle.

GBP/AUD RATES: Brexit deal still key

Will a Brexit deal be reached before the March 2019 deadline? Is it more likely that a backstop agreement will be put in place, which will allow talks over this key issue to continue beyond March’s cut-off?

In truth, none of us know what the final outcome will be. I believe it is likely that a backstop will be put in place, which will allow Brexit talks to continue, however this in itself could lead to further market unrest, due to the continued uncertainty that it will cause.

AUD rates affected by trade wars

Looking at the Australian economy, the current trade stand-off between the US and China is starting to have a direct impact on the Chinese economy. Chinese stock markets continue to slide, with Chinese industrial firms showing a contraction of growth output for the 5th consecutive month.

This in turn means that China’s demand for Australia’s raw materials has slowed in recent months, which is putting pressure on Australia’s export driven economy.

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