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Pound to Australian Dollar Exchange Rate Today - GBP/AUD Falls as UK-EU Tensions Rise on Irish Backstop

March 8, 2019 - Written by John Cameron

The Pound to Australian Dollar (GBP/AUD) exchange rate is down today and is currently trading around AU$1.8619 on the inter-bank market.

Sterling (GBP) fell against the Australian Dollar (AUD) today as the UK is coming under increasing pressure to remedy the Irish backstop issue, and with a the lack of developments forthcoming from recent negotiations, this has left many Pound traders feeling jittery.

Prime Minister Theresa May, meanwhile, is due to meet workers in Grimsby, Lincolnshire, today, in which she is expected today:

‘[J]ust as MPs will face a big choice next week, the EU has to make a choice too. We are both participants in this process. It is in the European interest for the UK to leave with a deal. We are working with them but the decisions that the European Union makes over the next few days will have a big impact on the outcome of the vote.’

This is causing many Pound traders to remain cautious, however, for if the Irish backstop issue fails to draw a consensus between the UK and the EU, this would likely see Theresa May’s Brexit deal being rejected by the House of Parliament on 12 March, which would weaken the GBP/AUD exchange rate.

The Australian Dollar, meanwhile, has gained against a weakened Pound today despite a raft of disappointing Chinese data stats, with Chinese exports for February plummeting by -20.7%. With China being Australia’s closet trading partner, this has left many ‘Aussie’ traders nervous.

Kevin Xie, an economist at the Commonwealth Bank, commented:

‘The outlook for Chinese exports remains soft because of the global economic slowdown. We expect import growth to remain weak until the announced fiscal stimulus flows through the real economy later 2019.’

AUD/GBP Exchange Rate Rises as Iron Ore Prices Increase

The ‘Aussie’ has however benefited from yesterday’s Australian trade balance figures for January which shot up above consensus to 4,549m, buoying optimism in the possibility of a recovering economy.

Kristina Clifton, a Senior Economist at the Commonwealth Bank, was optimistic, saying:

‘The trade surplus has been on an improving trend over the past year… This trend is helping to lift company profits and government revenues.’

AUD has also benefited today from increasing iron ore prices today, with the price for benchmark 62% fines rising by 0.6%, and with the Australian economy heavily iron-reliant, this has buoyed optimism in the ‘Aussie’ today.

The financial services company, HSBC, however, warned:

‘Iron ore prices have overreacted to small supply disruptions… We believe this is unsustainable and expect spot prices to correct materially towards the $60s over the medium-term.

GBP/AUD Forecast: Pound Could Soar if May’s Brexit Deal Gains Traction

‘Aussie’ traders will be looking ahead to tomorrow’s release of the Chinese CPI figures for February, and with any improvement of the Chinese economy this could provide some uplift for the Australian Dollar.

Tomorrow will also see the publication of the Chinese year-on-year PPI figures for February which are expected to increase.

Pound traders, however, will be looking ahead to Tuesday, which will see the publication of the UK manufacturing production figures for January, and with any signs of improvement this could prove Sterling-positive.

The GBP/AUD exchange rate will remain particularly sensitive to Tuesday’s UK parliamentary vote on Theresa May’s Brexit deal, and if MPs show any signs of backing the withdrawal agreement, this could see the Pound soar.

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