Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat as Brexit Rally Runs out of Steam

October 14, 2019 - Written by John Cameron

STORY LINK Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat as Brexit Rally Runs out of Steam

Pound Australian Dollar (GBP/AUD) Exchange Rate Left Muted Ahead of Last-Minute UK-EU Talks

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate was left muted and the pairing is currently trading at around AU$1.8585.

The Pound’s rally ran out of steam at the start of the week, after increased hopes the UK would leave the European Union in an orderly fashion buoyed GBP last week.

On Friday, the EU agreed to hold another round of negotiations in an attempt to tackle the deadlock and secure a deal before the Halloween deadline.

Meanwhile, the UK and EU negotiating teams are set to meet for last-minute talks before this week’s crunch summit.

Following further talks this weekend in Brussels, EU ambassadors were told the UK would make concessions to its plan for the Northern Irish border.

However, the bloc’s chief Brexit negotiator, Michel Barnier noted there was still ‘a big gap’ in customs arrangements which likely left Sterling under pressure.

Commenting on this, RBC Capital Markets’ FX strategist, Daria Parkhomenko said:

‘Brexit talks between the UK and the EU will continue today. With the EU council meeting to take place on Oct. 17-18, Brexit headlines will be the main focus for this week.’

US-China ‘Temporary Truce’ Leaves Australian Dollar (AUD) Flat

The Australian Dollar was left under pressure despite US President Donald Trump calling the phase one US-China trade deal ‘very substantial’.

However, the risk-sensitive ‘Aussie’ was left muted as analysts have said the agreement appears to be more of a ‘temporary truce’ than a real trade deal.

Commenting on this, senior economist for Asia Pacific at Allianz Global Investors, Christiaan Tuntono said:

‘We think the ‘substantial’ first-stage trade deal made by Trump with China looks more like a truce than a genuine deal.’

Analysts have also emphasised that the real issues have not yet been ironed out, and Vishnu Varathan, Head of Economics and Strategy at Mizuho said:

‘In terms of the real thorny issues, none of that is thrashed out.

‘So the ‘substantial’ is for the low hanging fruits – it’s a bit lower than the low hanging fruits actually. And we haven’t seen anything of real material yet.’

Part of the deal means China will purchase around $50 billion worth of US agricultural products, although Varathan noted that China wants more goods, and added:

‘It doesn’t look like a huge stretch on either side, and I think China’s harder stance, and hunkering down on its position hasn’t really changed either.’

Pound Australian Dollar Outlook: Will a Dovish RBA Send AUD Lower?

Looking ahead to Tuesday, the Australian Dollar (AUD) could slump against the Pound (GBP) following the release of the Reserve Bank of Australia’s (RBA) meeting minutes.

The ‘Aussie’ could be left under pressure if the policy meeting minutes reveal the bank is overly dovish and policymakers believe that another interest rate cut is needed to buoy growth.

Meanwhile, Sterling could edge up following the release of the UK wage growth and unemployment data.

If the unemployment rate edges lower while wage growth continues to increase, the Pound Australian Dollar (GBP/AUD) exchange rate is likely to rise.

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