The AUD to GBP exchange rate was trading higher on Wednesday as fears over the virus and lockdowns have outweighed any positive sentiment on the Brexit deal. The UK Parliament will vote on Boris Johnson’s deal later on Wednesday and the deal is set to pass as the Labour party and Johnson’s own party hardliners have said they will support the deal.
AUDGBP was trading at 0.5650 early on Wednesday and the pair may want to test the previous highs at 0.5720.
China Trade Spat Still Weighing on Australian Economy
Australia’s economy is being hit by its own trade issues as China continues to put pressure on its trading partner.
Customs data has shown that China has slashed its imports of Australian wheat to a nine-year low of 880 tonnes last month. China only accounts for 10% of the country’s wheat exports, but it is the latest in a range of actions by China to hit Australia economically. The two countries have seen tensions rising after the Aussie government supported a group of nations who called for an investigation into China’s efforts during the coronavirus.
This situation could weigh on the Australian economy in 2021 and as the UK sees its own trade issues clear up under a Brexit deal, the Aussie currency outlook could sour on the China stance.
Virus Spread in the UK Will Still Hurt Currency
The AUDGBP will see its near-term future decided largely by the coronavirus spread and lockdowns in the UK The country was placed into strict lockdowns before Christmas as a new strain of the virus hit the country. In contrast, Australia saw a loosening of restrictions for the holidays.
The move into 2021 will see the lockdowns weigh on the UK economy and could lead to further stimulus from the Bank of England. This could take the form of negative interest rates from the bank, which was on the cards for a No Deal Brexit, but the policy could be implemented in the new year if the lockdowns persist.
The AUDGBP was trading higher by 0.37% on Wednesday ahead of the U.K. Parliament vote and the final approval of a deal may see some support for the pound. This may come in January when institutional investors come back from the Christmas break and set their new year intentions with a sterling rate that could be seen as undervalued. The AUD to GBP rate was trading at 0.4400 when Britain’s referendum came closer and sterling may advance as it looks to ink new trade deals around the world. The country could even start a new relationship with China, while Australia’s relationship with the world’s second-largest economy sours.
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