Pound to Australian Dollar Exchange Rate Slides as Hard Brexit Bets Build-Up

Pound to Australian Dollar Exchange Rate Slides as Hard Brexit Bets Build-Up

The GBP/AUD exchange rate slipped yesterday after fears of a hard Brexit escalated. Fresh market anxiety rose after comments from the BDI, a key German industry association which reignited fears over the chance of a potential hard Brexit and left the pound on the back foot. The BDI warned that a comprehensive free trade agreement is impossible for the UK and the EU to resolve by the end of the year. This warning soured the mood of investors. Meanwhile, the Australian dollar is still suffering at the hands of the Coronavirus outbreak.

GBP Suffers After Negativity Surrounding The Brexit Time Limit Is Voiced

The BDI, noted that the time provided for the Brexit agreements to be negotiated is far too little and even branded it “impossible”. The key German industry association highlighted that a comprehensive free trade agreement would be “impossible” for the UK and EU to agree within the timescale of the Brexit deadline of December 2020. Naturally, this statement soured the mood of investors and send GBP tumbling. Support for the pound lessened further in response to the latest CBI retail sales index, which showed a second consecutive month of flatness for the UK.

Concerns for Australian Dollar Outlook as Coronavirus Fears Grow

Even with the pound sterling’s weakness, AUD has failed to capitalise thanks to an increased atmosphere of market risk aversion. The persistent spread of the Wuhan Coronavirus left investors with shaken confidence as fears of a further slowdown in global growth mount. Both iron ore and copper prices came under fire as bets of the outbreak impacting the percentage points of Chinese growth in the coming months. The lowered Chinese demand for base metals looks to also weaken the commodity-correlated AUD. As the antipodean currency also commonly functions as a proxy for market sentiment towards the Chinese economy, any potential for Aussie Dollar gains were notably limited.

Going forward, the AUD will look to today’s Q4 consumer price index data with hopes of positive returns to lift AUD. Evidence of mounting inflationary pressure within the Australian economy may offer the currency a rallying point as the odds of future RBA rate cuts fall.

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