GBP/AUD rates have fallen away from their recent high this week, with the pound failing to make any impression on the 1.85 resistance level.
Sterling has once again felt the effects of the Brexit stranglehold, which continues to weigh heavily on investors’ risk appetite for GBP.
Whilst its failure to make a run on 1.85 will be a disappointment to those clients looking to execute a purchase of Australian dollars, it has least for the time being found plenty of support above 1.80.
This is now likely to become a key threshold for the pair as we head towards the UK’s Brexit deadline of March 29th. How the GBP/AUD pair will evolve beyond what is a monumental date in the UK’s history, is likely to be largely dependent on whether UK Prime Minister Theresa May manages to secure a deal with the EU.
Whilst the threat of a no-deal remains, even if many believe this is not the likely outcome, the pound is likely to struggle to sustain any significant improvement. It is likely we will see the AUD continue to find plenty of support around 1.85 and even if this barrier is breached, I think it highly unlikely that sterling can reach the dizzy heights of 1.90 in the short-term.
Onto the Australian economy, which is facing problems of its own. The current trade standoff between the US and Australia’s largest trade partner China is having a negative impact on Australia, as China’s demand for Australia’s vast supplies of raw materials has softened. This has inevitably put a strain on the AUD, which could find itself on the back foot if the UK manages to push through a Brexit deal over the coming weeks.
The AUD is also suffering due to a slowdown in global trade. Being a commodity-based currency it relies heavily on consistent global growth to drive investors’ risk appetite. Add to this a record low interest rate and it is easier to understand why investors have been shying away from the AUD in recent months.
With the potential for improving global political certainty as US-China trade talks progress, any positive movement on this situation is likely to lend support to the Aussie dollar. For more information on the factors to be aware of, feel free to complete the form below to get in touch. I’ll be happy to respond personally and discuss your requirements.