GBP to AUD forecast: GBP/AUD exchange rate breaches 1.87

GBP to AUD forecast: GBP/AUD exchange rate breaches 1.87

In today’s GBP to AUD forecast we look at how the rates are being affected by the high probability of a Brexit extension.

The GBP/AUD exchange rate will still largely be dictated by Brexit. The next key event is due to take place before 12th March, but is likely to be on the day itself. Theresa May’s Brexit deal is due to be voted on by Parliament and in it’s present form I believe there is little chance the deal will be voted through.

If we look back to December, the last time May’s deal was voted on, she suffered a damning defeat. One of the only forms of ammunition she has is the threat of a no deal and it is important to remember the probability of a no deal was higher in December than at present.

I would expect the deal to be voted down again unless between now and then Theresa May succeeds in gaining concessions over the Irish border from Brussels. If she does not and the deal fails to get through Parliament there will then be a vote the following day on whether or not MPs would be prepared to leave the EU with no deal in place.

With so many MPs vocally against leaving with a no deal I think there is little chance of a no deal scenario being voted through. This would bring us to a third vote the day after on whether there should be a three month extension to the UK’s official exit from the EU on 29th March. I think an extension is the likely outcome.

The market moves on rumour as well as fact which is why we have witnessed recent spikes in the GBP/AUD rate. This can be warranted by the drop in probability of a no deal scenario and the higher probability of an extension.

Although Sterling will remain fragile I am still of the opinion it is undervalued, if there was firm news on the Irish border I am confident GBP/AUD rates will breach 1.90.

GBP to AUD forecast: Australia affected by exports to China

Australia is also suffering from it’s heavy reliance on raw material exports to the Chinese. Particularly iron ore and coal. As such, any economic uncertainty surrounding China has a knock on effect to Australia. The current China/US trade war seems to be subsiding with positive news coming out of talks. There are rumours tariffs could be dropped if China agree to larger purchases of US agricultural goods and also agree to lower barriers for US companies in China.

Despite this investors still remain concerned until there is resolution. If there is firm news expect a spike in AUD value.

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