The pound to Australian dollar exchange rate continues to move higher having now broken 1.88 for the GBP to AUD pair as Brexit developments heavily impact the exchange rate. Rates for GBP to AUD are now sitting at a 2 ½ year high creating a good opportunity for those looking to buy Australian dollars. Last night the UK Government was defeated in a vote that takes a no deal Brexit off the table.
Will Parliament vote to extend Article 50?
Parliament will today debate and vote on another motion to delay Article 50 which will require asking for permission to delay Brexit. The markets have now started to price in the prospect that there may be a softer Brexit or one that could be delayed for a long period of time. The underlying question is the length of time that would need to be granted to come to a final decision on Brexit. Whether or not that request would be granted by the EU will also create additional volatility for GBP to AUD rates.
As such it really does depend on what is offered by the EU which does mean that all options are open including the possibility of a no deal Brexit. There is now so much uncertainty in these final weeks that high volatility for GBP vs AUD is to be expected. Any new developments in these coming days are likely to see the pound move strongly and another meaningful vote next week will invariably see further volatility for the GBP to AUD rate.
Australian economic data disappoints
The Australian dollar is also feeling the squeeze after weaker consumer confidence figures disappointed the markets, alongside a reduction in housing finance. The Australian property market remains very topical at the moment having seen a big drop in prices in most of the big cities to include Sydney and Melbourne. The property market is often one of the first areas to drop before a bigger economic downturn which is not boosting confidence in the Australian dollar.
Whilst commodity prices have been climbing higher this week which would normally be seen as positive for the Australian dollar the wider issue of the prospect of falling trade between China and Australia appears to be a bigger cause for concern. Chinese growth has deteriorated sharply with the reduction exacerbated by the ongoing US China trade war.
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