The pound is making gains against the Australian dollar once again with GBP/AUD rates having pushed back over 1.80. The strength in the price of sterling is largely coming from renewed confidence in the ongoing Brexit negotiations. The Sunday Times this weekend have reported that a deal is very much underway and there is a growing chance that an emergency EU summit will now take place later in November.
Brexit news: EU to change stance on Irish border?
It has been reported that the EU’s chief negotiator Michel Barnier is open to changing the stance on the Irish backstop which could now encompass the whole of the UK rather than just Northern Ireland. This has been a major stumbling block but the mood does appear to be lifting with optimism of a Brexit deal to be had. Those looking to buy Australian dollars could see some better opportunities if all goes well at a Brexit Cabinet meeting on Tuesday and if the EU summit is offered later on in the week.
Australian dollar rates: Australian interest rate decision this week
The Reserve Bank of Australia will be meeting later today, although interest rates are expected to remain on hold. Perhaps what will be more interesting will be what happens in the US when the Federal Reserve meets this Thursday and when the next US interest rate rise will come about. The Australian dollar has weakened this year for a number of reasons but the principal driver has been the disparity in interest rates between Australia and the US. As interest rates look set to move higher in the US, and with steady rates in Australian there is likely to be a further movement of investor funds away from Australia to the US. This could see further Australian dollar weakness.
US / China trade war to end soon?
The Australian dollar has also been under considerable pressure over the trade war between the US and China. Recent dialogue would suggest though that there is an attempt to try and reach an agreement for a US/China trade deal. If anything this could be seen as positive for the Australian dollar but considering the terms of the recently agreed USMCA (previously NAFTA) trade deal between the US, Mexico and Canada this might be just hot air.
The USMCA agreement stipulates that any trade deal with China between member states cannot be agreed unless consulted with the other parties. As such there are still some big uncertainties for the Australian dollar although much of these are external to the control of the Reserve Bank of Australia.
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