GBP to AUD Forecast – Brexit Leads to Constitutional Crisis

GBP to AUD Forecast - Brexit Leads to Constitutional Crisis

The pound to Australian dollar exchange rate has fallen lower slightly lower as Britain is currently in the midst of a constitutional crisis over Brexit. With just 9 days to go before the planned withdrawal date of 29th March the British Prime Minister Theresa May will now write to the European Union today to request a delay of Article 50. It has been reported that a short delay to the end of June will be requested although it is not clear whether this will definitely be granted and whether any conditions would be placed on Britain for having such an extension.

Theresa May is banking on having another crack at the meaningful vote (MV3) which could come as soon as next week before the 29th March with Thursday 28th being tipped as the likely date. Brexit is dominating the markets at present for the GBP to AUD pair at this crucial time at the end of the Brexit negotiations. It is still unclear where Brexit will end and whether a deal will or won’t be reached. The prospect of a no deal Brexit remains and in this scenario GBP AUD would likely see a sharp drop lower.

The Australian dollar meanwhile faces its own troubles as ongoing uncertainty over the China-US trade war continues to create an uncertain outlook for the dollar. The latest development is that China has been reported to be ‘walking back’ on negotiations suggesting that talks are not going so well after a series of positive statements from both sides in recent weeks.

The Australian dollar is heavily influenced by these developments due to the fact that the Australian dollar is a commodity currency. Australia has a huge export market to China so it is in Australia’s interest for China to come to an agreement with the US, which should be good for global trade and in particular the Australian economy.

Australian unemployment figures are released this evening and could have some impact on the dollar. The economic picture is looking less rosy down under, with much attention on the Australian housing market at present having seen price falls in the major cities. The Reserve Bank of Australia (RBA) may now be loathed to raise interest rates any time soon with the ongoing trade war and deterioration in the Chinese economy. A dovish tone from the RBA is likely to see further pressure on the Australian dollar.

The two biggest drivers for GBP vs AUD remain Brexit and the US China trade war. This week is likely to be full of developments from political leaders in the UK and EU and we could see high levels of volatility for the GBP AUD interbank exchange rate. If you’d like to discuss the factors currently impacting AUD exchange rates, feel free to use the form below to get in touch. I’ll be happy to respond personally and discuss your requirements.