GBP/AUD Rates Fall Back Towards 1.80 as UK Prepares for Crunch Brexit Vote

Why is the RBA keeping interest rates on hold?

GBP/AUD rates have fallen back towards 1.80, with the Pound’s resistance around this threshold coming under pressure once again.

Reports this morning from former Brexit Secretary David Davis suggest that UK Prime Minister Theresa May could once again delay the “meaningful vote” on January 14th, when MP’s will vote on her current Brexit deal with the EU, if she looks set to lose it.

The PM has already delayed the vote once and Davis feels she may have to do the same again to avoid a crushing defeat, which would not only put her own position in number 10 under serious threat but also push the UK ever closer to a no-deal Brexit scenario with the EU.

Davis went on to say that this may in fact be exactly what the UK should be preparing for, as he believes the closer we get to a no-deal the better the final deal may be.

This of course is a very dangerous strategy, as a no-deal scenario is widely considered the worst outcome for the UK economy.

If this ultimately does occur than I expect the Pound to come under further pressure and we could see a sharp decrease in value against the AUD, despite the current problems facing the Australian economy.

The AUD was under pressure for much of 2018, as a slowdown in Chinese economic growth and the global markets, seriously hampered investors risk appetite for commodity-based currencies such as the AUD.

With Chinese manufacturing figures falling to their lowest levels in 19 months earlier this week, I expect the AUD to remain handicapped for the foreseeable future.

Due to this, it is likely that Sterling is being supported, at least to some extent, by the current slowdown in the Australian economy. It is also mean that either a breakthrough in Brexit negotiations, or an up upturn in Chinese growth (Australia’s largest trading partner), could signal a sharp improvement for either GBP or AUD.

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