GBP AUD Exchange Rate Rises as UK Government Backs Down from ?No Deal? Threat

March 28, 2017 - Written by John Cameron

STORY LINK GBP AUD Exchange Rate Rises as UK Government Backs Down from ?No Deal? Threat

The British Pound to Australian Dollar exchange rate traded near its weekly lows on Wednesday afternoon. As risk-sentiment improved, the Australian Dollar strengthened and was able to hold against a highly volatile Pound.

Analysts predict Sterling movement will cool later in the week, as the first major developments in Brexit negotiations are unlikely to be made until May or June. This could see GBP/AUD recovering from lows if UK data impresses.

[Previously updated 28/03/2017]

The Pound Australian Dollar exchange rate struck a six-week high this morning as the UK government was rumoured to backing off its threat to leave the EU without a deal.

Pound Australian Dollar (GBP AUD) Advances as Government rethinks its Brexit Rhetoric

The Pound Australian Dollar (GBP AUD) exchange rate rose this morning as a number of European diplomats have said that the UK government its backing down from earlier claims that it would be willing to leave the EU without a deal if negotiations broke down.

The rumour is a significant U-turn from Prime Minister Theresa May’s pervious claim that ‘no deal for Britain is better than a bad deal’, with the government suggesting at the time that it would fall back on World Trade Organisation (WTO) agreements if it could not come to an acceptable deal with the EU.

Such a possibility drew concerns from investors as WTO rules would likely lead to higher tariffs for businesses, while also introducing a host of red tape that British firms would be forced to navigate.
One EU Diplomat is reported to have said;

‘They have realised that ‘no deal is better than a bad deal’ won’t fly. They are worried about people in this country who have an ideological and political intention of creating chaos. The civil service have told them it would create havoc.’

The news was welcomed by GBP investors as they hope that the government will be willing to bend a little more in negotiations, leading to a more harmonious split from the EU.

Australian Dollar Tumbles as Iron Ore Erases this Year’s Gains

The Australian Dollar was weakened overnight on Tuesday as it continued to be pressured by a decline commodity prices, with a fall in iron ore in particular weighing heavily on the ‘Aussie’.

The spot price for benchmark 62% fines had tumbled 4.1% to $80.57 a tonne at the start of the session this morning according to Metal Bulletin.

Prices for Australia’s largest export have now plummeted over 14% from a high of $94.86 a tonne that it struck on February 21st, almost completed eroding the commodities gains since the start of the year.

The fall follows further weakness in Chinese steel prices, the price of which is tied closely to demand for the raw iron ore required to produce it.

Metal Bulletin said;

‘China’s spot rebar prices fell on Monday after a sharp drop in the billet market over the weekend.’

Analysts predict that prices will continue to crumble as the week goes on as the weak demand coincides with high inventory levels at Chinese ports.

GBP AUD Exchange Rate Forecast: Brexit Process to Begin Tomorrow

The GBP AUD exchange rate may cede ground on Wednesday as the UK government finally begin the process to split from the EU, with Prime Minister Theresa May expected to send a letter to EU leaders triggering Article 50.

Meanwhile AUD investors are likely to look closely at Australia’s New Home Sales figures on Thursday as the Reserve Bank of Australia previously suggested that housing remains a key economic issue for policymakers against tightening monetary policy.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.65 and the AUD GBP exchange rate was trending around 0.60.

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TAGS: Australian Dollar Forecasts