Pound Australian Dollar (GBP/AUD) Exchange Rate Soars by 1.4% as EU Give Green Light on UK-EU Brexit Deal Talks

October 11, 2019 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Soars by 1.4% as EU Give Green Light on UK-EU Brexit Deal Talks

GBP/AUD Exchange Rate Skyrockets on Restored Brexit Deal Hopes

The Pound Australian Dollar (GBP/AUD) exchange rate soared by 1.4% today, with the pairing currently trading around AU$1.863 after the EU27 gave the green light for UK-EU Brexit negotiations to enter the key ‘tunnel’ phase.

This follows talks between Michel Barnier, the EU’s Chief Brexit Negotiator, and UK Brexit Secretary Stephen Barclay, which were described as ‘constructive’. Yesterday also saw Prime Minister Boris Johnson and Leo Varadkar, Ireland’s Taoiseach, carve out a ‘pathway to a possible deal’.
The European Commission said in its statement:

‘The EU and the UK have agreed to intensify discussions over the coming days. The EU’s position remains the same: there must be a legally operative solution in the withdrawal agreement that avoids a hard border on the island of Ireland, protects the all-island economy and the Good Friday [Belfast] agreement in all its dimensions, and safeguards the integrity of the single market.’

As a result, market optimism in the Pound was boosted now that the UK and EU appear to be making progress on a possible Brexit deal ahead of the EU summit next week.

AUD/GBP Exchange Rate Plummets despite US-China Trade Deal Hopes

The Australian Dollar (AUD) failed to gain against Sterling today, despite increased risk-appetite in the ‘Aussie’ after US-China trade talks showed signs of converging on a possible deal between the two superpowers.

AS China is Australia’s closest trading partner, any signs of easing trade tensions between the US and China boosts confidence in the risk-sensitive Australian Dollar.

China’s Vice Premier Liu He commented:

‘The Chinese side came with great sincerity, willing to cooperate with the US on the trade balance, market access and investor protection.’

US President Donald Trump also commented that ‘good things are happening’ in trade talks. Mr Trump tweeted:

‘Warmer feelings than in recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen!’

Any signs of a US-China trade breakthrough today could, however, see ‘Aussie’ claw back some of its losses against the much-stronger Sterling.

GBP/AUD Outlook: Brexit Developments to Remain in Spotlight

Australian Dollar traders will be looking ahead to Tuesday’s release of the Reserve Bank of Australia’s (RBA) release of its meeting minutes. Any dovish comments about the state of the Australian economy, however, could raise rate cut fears and put downward pressure on the ‘Aussie’.

Meanwhile, Sterling traders will be looking ahead to Tuesday’s release of September’s ILO unemployment rate figure.

Tuesday will also see the release of August’s UK average earnings figure, which is expected to ease from 3.8% to 3.7%.

Brexit developments will continue to drive the GBP/AUD exchange rate next week. Any signs of UK-EU talks breaking down, however, could see market confidence in Sterling begin to fall on heightened no-deal fears.

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