Pound to Australian Dollar rates have fallen back below 1.80 this week, with the Pound once again unable to find sufficient support above this key threshold.
This dip in support comes as the markets prepare themselves for next week’s crucial Brexit vote, when UK MPs will vote whether or not to back Prime Minster Theresa May’s current Brexit deal with the EU.
With the general consensus leaning towards a lack of support for the current Brexit deal, how will a potential no vote affect Pound to Australian Dollar rates over the coming weeks?
If the PM fails to push through the deal on the 15th then the prospect of the UK leaving the EU without a deal in place increases significantly. This will likely lead to a further sell-off of Sterling positions by investors, who will view the long-term instability of the UK economy unfavourably and as such, the Australian Dollar could make further inroads against the Pound.
How far it can go is difficult to predict, especially as the Australian economy is facing problems of its own, but it’s certainly not inconceivable to imagine a move back towards 1.70 against the Pound.
However, assuming this outcome is inevitable would be discarding the on-going issues facing the Australian economy and ultimately the Australian Dollar. A lack of growth in the global economy is having a negative impact on all of the commodity-based currencies including the Australian Dollar. It relies heavily on its exports and with global trade slowing over recent months, the Australian Dollar is struggling to make any sustained impact against a basket of currencies.
In fact, you can certainly argue that without the current economic malaise in the UK economy due to Brexit, it is unlikely the Australian Dollar would be trading at the current levels, when you look at the issues it continues to face.
With China’s growth slowing significantly in the last two quarters of 2018 and Australia’s close trading ties to the world’s second largest economy, it is not a surprise to see the Australian economy and ultimately the Australian Dollar suffer as a result.
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