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Pound Australian Dollar (GBP/AUD) Exchange Rate Steadies despite UK Insolvencies Fears

January 29, 2019 - Written by John Cameron

GBP/AUD Exchange Rate Flat as Traders Gear up for Brexit Vote

The Pound Australian Dollar (GBP/AUD) exchange rate is steady today and is currently trading around AU$1.8377 on the inter-bank market.

Sterling (GBP) failed to make any gains on the Australian Dollar (AUD) today as MPs head to the House of Commons to vote on a variety of amendments to Prime Minister Theresa May’s Brexit ‘Plan B’.

Conservative MPs have been urged by May to back senior Conservative backbencher Sir Graham Brady’s amendment which will act as an ‘insurance policy’ against a hard Irish border – an issue that was a crucial problem for many MPs, and which was fundamental to ‘Plan A’ being voted down.

Pound investors have been relieved by these Brexit developments, with Labour MP Yvette Cooper’s amendment including the possibility to extend Article 50 – thus further increasing the likelihood of a second referendum – while both amendments also allow for a possible breaking of the Brexit stalemate.

AUD/GBP Exchange Rate Rangebound as Business Conditions Worst in Over Four Years

Australian Dollar traders, meanwhile, were disappointed by today’s release of National Australia Bank’s (NAB) business conditions figures for December which showed a decrease to 2 – indicating a general lack of sentiment in the Australian economy.

The ‘Aussie’ has increasingly weakened over pessimism for the future of Australia’s economy following the poor business conditions figures, with overall conditions being at their weakest level in over four years.

Alan Oster, Chief Economist at the National Australia Bank, commented:
‘At face value, the fall over the past six months suggests a significant slowing in the momentum of activity in the business sector — especially from the highs seen earlier in the year …The deterioration … was driven by declines across trading, profitability and employment, and was relatively broad-based across states and industries.’

The Australian Dollar has failed to recover after yesterday’s news that Chinese industrial profits for December fell to 10.3%, dampening traders’ confidence in the Australian economy with China being Australia’s foremost trading partner.

Pound Australian Dollar (GBP/AUD) Exchange Rate Steadies as UK Insolvency Figures Jump

Although Brexit developments are in the spotlight today, the UK also saw the publication of some insolvency figures for 2018 which showed a 16% jump, with 9.3% being corporate insolvencies for the fourth quarter.

John Cullen, a business recovery partner at Menzies LLP, commented:
‘Despite the low rate of unemployment, the current climate of Brexit uncertainty and political instability, is unsettling for consumers, and this is creating exceptionally challenging trading conditions for many businesses. Corporate insolvencies are likely to continue to rise in 2019.’

GBP/AUD Outlook: Brexit Vote to Determine Pound Confidence

The GBP/AUD exchange rate will remain highly sensitive to the outcome of today’s vote on Brexit amendments, determining the future of Theresa May’s withdrawal agreement deal and the negotiation between the UK and the EU ahead of the 14 February parliamentary vote.

Any signs that a Brexit no-deal will be taken off the table will likely see Sterling soar, however, with the various amendments suggesting a breaking of the Brexit deadlock.

AUD traders will be looking ahead to tomorrow’s publication of Australia’s CPI figures for Q4 which are expected to remain static, although any signs of an increase could provide the AUD/GBP exchange rate with some much-needed uplift.

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