The pound to Australian dollar exchange rate has fallen over the last week to the tune of 3 cents for GBP/AUD. The markets are preparing for a volatile few days ahead as Brexit remains the main driver for the GBP to AUD pair. Today in Parliament will be a debate on extending Article 50, whilst discussions between the two main political parties continue to try and find cross party support for a deal on Brexit. So far, whilst discussions have been technical they have failed to bear fruits, adding another layer of uncertainty to the fraught negotiations. The Government also announced its intention to contest the European elections on 23rd May 2019 having written to candidates yesterday to prepare.
Pound value could be affected by emergency EU Brexit summit
If a deal were to be reached between Labour and the Conservative Party before these elections then the requirement to contest them would be removed. How things unfold from here will very much depend on the emergency EU Brexit summit tomorrow which will seek to allow Britain more time to find a majority in Parliament for a way forward. As things stand the deadline for the UK is this Friday. Even if the EU offers the UK an extension it remains to be seen whether Theresa May will be able to find sufficient common ground with the opposition Labour Party to get a majority in Parliament for her deal or a revised version of her deal. Any statements are likely to create significant volatility for GBP vs AUD in the days ahead.
The Australian dollar has also found support of late with a rally in the price of iron ore. As a commodity currency a rise in commodity prices to include iron and copper is generally seen as positive for the AUD to GBP. Australia continues to be weighed down by a downturn in China although recent economic data from Australia’s biggest export market showed some small signs of improvement. Manufacturing data showed a slight pickup last week bringing some renewed confidence in the eyes of investors. However delays with the US China trade talks are hampering any breakthroughs until clarity on future trade is offered. For the time being trade talks appear to be moving in the right direction with positive noises being made from the US and China that a deal is in sight.
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