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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Left Flat as Varadkar Warns ‘Many Issues’ Unresolved

October 16, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Left Muted Ahead of EU Crunch Summit

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate was left muted on Wednesday, and the pairing is currently trading at around AU$1.8924.

The Pound was left flat against the Australian Dollar as traders nervously awaited last-ditch efforts from the UK and EU to secure a Brexit deal ahead of Thursday’s crunch summit.

While Tuesday’s reports revealed there was still a chance the UK will secure a deal, Downing Street said that there was ‘more work still to do’.

As Brexit talks continue, Irish Taoiseach Leo Varadkar said that there were still ‘many issues’ that needed to be resolved before a deal can be reached.

Varadkar said that there were still differences over how to move goods between Britain and Ireland and how to secure support for any new arrangements in Northern Ireland.

Markets turned increasingly cautious, and commenting on this, senior economist at Berenberg, Kallum Pickering said:

‘Most of the good news that could have been anticipated has been priced in, and now there’s caution it seems on whether we get a deal today or not.’

Australian Dollar (AUD) Left Flat as China Warns of ‘Countermeasures’

Risk appetite was left on the back foot thanks to increased tensions between the US and China which left the Australian Dollar under pressure.

Relations between Washington and Beijing were left strained after the US House of Representatives passed the ‘Hong Kong Human Rights and Democracy Act’ which supported the protestors.

China criticised the bill which appeared to be supportive of the pro-democracy protests in Hong Kong, and Beijing’s Ministry of Foreign Affairs spokesperson, Geng Shuang said:

‘If the relevant bill is finally passed into law, not only will it hurt Chinese interests and China-US relations, but also seriously damage US interests.

‘Regarding the wrong decision of the US, the Chinese side will have to enact effective countermeasures, firmly safeguard Chinese sovereignty, security and development interests.’

Added to this, on Tuesday the International Monetary Fund (IMF) warned global growth is likely to increase at the slowest pace since the 2008-2009 financial crisis, weighing on the risk-sensitive 'Aussie'.

Pound Australian Dollar Outlook: Will Brexit Pessimism Send GBP Lower?

Looking ahead to Thursday, the Australian Dollar (AUD) is likely to remain under pressure against the Pound (GBP) following the release of the Aussie unemployment rate.

If unemployment in Australia is stuck at 5.3% as expected, it could send AUD lower as the Reserve Bank of Australia’s (RBA) rate cuts have had little impact on lowering unemployment.

Meanwhile, Brexit pessimism is likely to leave the Pound under pressure as the UK approaches the 31 October deadline.

If reports reveal the UK is unlikely to secure a deal with the European Union by tomorrow’s crunch summit, it will likely offset disappointing Aussie employment data, and cause the Pound Australian Dollar (GBP/AUD) exchange rate to slump.

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