The pound to Australian dollar pairing has seen some volatility in rcent weeks, as investors look to gauge the future expectations for both Brexit and the Trade Wars. Personally, I would not be surprised to see the pound rise against the Australian dollar in the coming weeks as investors seek to better understand what lies ahead on Brexit.
The expectation now is that we could very easily see an extension to the Article 50 window, which would put the UK on a longer leaving time-frame. However, this does need to be pre-approved by the EU who so far have not been too forthcoming in their assessments of why they would grant an extension.
I still feel that Brexiteers would rather a Brexit of some form, rather than no Brexit at all which is the direction we could soon be headed in if there is no agreement by the 29th March. Whilst a no-deal has been taken off the table as an option for now, there is a growing expectation this could occur in the weeks ahead. This would easily put the pound on a much stronger footing which would see us trading close to the 2 or 1.9 level.
On the Australian dollar side I feel we can expect weakness from the ongoing Trade Wars concerns, which could lift expectations of a global slowdown with China. Recent economic data has not been quite up to scratch for the Chinese economy which is putting pressure on the Australian economy and the decision by the Reserve Bank of Australia (RBA) is a worry.
Investors are concerned about the longer term prospects of the RBA and whether they are likely or not to consider cutting interest rates in the future. If they do go down this route as many predict then we could easily see GBPAUD levels rise closer to the 2 mark.
Depending on what happens with Brexit I now feel it likely that GBPAUD levels will rise closer to the 1.90 and 2 level over the coming weeks and months. Clients looking to buy or sell Australian dollars might benefit from a review of their requirements ahead of this.
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