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Markets Brace for Brexit, GBP AUD Exchange Rate Volatile

March 13, 2017 - Written by Frank Davies

The Pound Australian Dollar exchange rate was met by increased volatility this morning as reports suggest that Prime Minister Theresa May could invoke Article 50 by the end of the week.

Pound Australian Dollar (GBP AUD) Volatile as Brexit Set to Begin

The Pound Australian Dollar (GBP AUD) exchange rate fluctuated in trading today as markets brace for the possibility of Theresa May will begin the formal Brexit process sometime this week.

However this is not set in stone yet as the government still faces a parliamentary battle to pass its Brexit bill after the House of Lords made a couple of amendments to it last week.

The changes seek to ensure the rights of EU citizens living in the UK post-Brexit and to provide parliament with a guarantee that it will be given a ‘meaningful’ vote on the final terms of Britain’s exit from the EU.

But with reports suggesting that MPs will vote to reject the amendments and Peers not expected to challenge the bill any further in the event that they are defeated, Theresa May could be granted the authority to trigger Article 50 as early as Tuesday.

Such an event is likely to cause Sterling to tumble as the official start of Brexit triggers up to two years of uncertainty for markets, with many analysts predicting that the UK could find negotiations difficult.

James McCormack, Fitch’s Global Head of Sovereign Ratings said;

‘The UK will have a strong incentive to settle its “exit bill” quickly to preserve as much of the two-year negotiating period as possible for more difficult and important issues. But in so doing, it risks criticism at home of an early and unnecessary concession.’

Australian Dollar Struggles as Iron Ore Continues to Slump

The Australian Dollar ceded its early gains against the Pound this morning as it was pressured by tumbling commodity prices.

Iron ore in particular has been hit hard by the recent downturn in commodity markets, with the key Australian export having fallen 8.6% from multi-year high of $94.86 a tonne a couple of weeks ago to $86.72 a tonne at the start of trading on Monday.

However an uptick in Chinese commodity futures late in the Asian Trading session suggests that the decline could be coming to an end as Chinese construction activity begins to climb again after slowing down for the winter.

GBP AUD Exchange Rate Forecast: UK Employment Data Ahead

The GBP AUD exchange rate may weaken on Wednesday following the release of the UK’s latest employment data.

While the unemployment rate is expected to hold steady at 4.8% in January, markets are likely to be disappointed by an expected drop in average earnings from 2.6% to 2.4% over the same period.

Meanwhile NAB is predicted to report a drop in Australia’s February Business Confidence survey on Tuesday as global economic uncertainty weighs on sentiment.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.61 and the AUD GBP exchange rate was trending around 0.61.
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