Junker plays hard ball
GBP/AUD rates are currrently being dictated by Brexit. UK PM Theresa May has now confirmed 15th January as the date that Parliament will vote on her current deal. The vote was delayed due to the PM’s lack of confidence in the vote going in favour of the deal. European Commission President, Jean-Claude Junker has stated there will be no changes to the current deal and he is only willing to clarify the current terms.
Is it possible that the threat of a no deal could push May’s deal through?
Theresa May has suggested if the deal does not pass through Parliament at the first attempt then there will be a second vote, this could point to out that she feels Brussels will change it’s stance, unless Brussels backs down in the next three days.
There is still a lack of clarity surrounding Brexit which is not helping investor confidence. The majority of scenarios are pound negative, but if May were to resign or indeed lose a leadership challenge we could see a second referendum back on the table.
Junker has said there will be no delay on Article 50 unless there is a second referendum.
If May’s deal does not go through we could see a leadership challenge from Jeremy Corbyn, or there is the potential we could see May resign if it seems the deal will have no chance of getting through, although I don’t take her for someone who would quit. I am not a huge fan of May, but you cannot help but admire her perseverance in the circumstances.
Historically if a country loses it’s PM or President the currency in question would weaken, however in this situation it will be interesting to see the market’s reaction. We could see a drop initialially due to political uncertainty, but if it appears a second referendum comes to fruition it is widely predicted that the vote would conclude with a victory for remainers according to polls. This has the potential to boost pound value as investor confidence would be restored.
I wouldn’t be hanging fire if I was selling the pound. The majority of Brexit outcomes result in pound weakness if you have to move short to medium term. I would be looking to purchase at current levels or at least a tranche for safety.
The trade war between the US and China is a concern for the Australian dollar and if it were not for Brexit I think we would be seeing gains for sterling against the Australian dollar. Unfortunately the lack of clarity surrounding Brexit is outweighing any Aussie weakness.
If you’d like to discuss an upcoming transfer and how these factors are likely to impact exchange rates as we near the deadline for a Brexit deal being reached, feel free to use the form below to get in touch. I’ll be happy to respond personally and assist you with your enquiry.