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Pound Australian Dollar (GBP/AUD) Exchange Rate Left Flat as UK Offered Three-Month Brexit Extension

October 28, 2019 - Written by John Cameron

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted as EU Offer UK a ‘Flextension’

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate was left muted on Monday, with the pair currently trading at around AU$1.8836.

At the end of last week, the European Union agreed to allow the UK to extend Article 50, preventing the country from crashing out of the bloc without a deal.

On Monday morning Sterling was left flat as European Council President, Donald Tusk revealed the bloc had agreed to grant the UK a ‘flextension’ to 31 January.

Tusk tweeted:

‘The EU27 has agreed that it will accept the UK’s request for a Brexit flextension until 31 January 2020. The decision is expected to be formalized through a written procedure.’

Commenting on this, global Brexit lead at Deloitte, Amanda Tickel noted:

‘While there is relief that the disruption of a no-deal exit on 31 October is off the table, further delay prolongs uncertainty. Businesses will be wondering what to do with partially implemented restructuring, stockpiles and logistics plans. With the added stepping stone of a possible election in the coming weeks, planning for the future could be even harder.’

Australian Dollar (AUD) Flat despite US-China Trade Deal Optimism

The Australian Dollar was left flat despite an increase in US-China trade optimism following comments on both sides suggesting they were closer to securing a trade agreement.

At the end of last week, the US Trade Representative’s office revealed they were ‘close to finalising’ some parts of a trade agreement with China.

This followed a high-level phone call between China’s Vice-President Liu He, and US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

Added to this, on Saturday, Beijing’s Ministry of Commerce said some parts of a deal were ‘basically completed’.

Meanwhile, on Monday, US President Donald Trump said that he expected to sign an important part of the deal ahead of schedule.

Speaking to reporters, the President stated:

‘We are looking probably to be ahead of schedule to sign a very big portion of the China deal, we’ll call it Phase One but it’s a very big portion.’

However, the ‘Aussie’ was likely left under pressure as investors remain sceptical, as even a partial US-China trade deal would not remove the risks posed by trade tensions.

Pound Australian Dollar Outlook: Will a Dovish RBA Weigh on AUD?

Looking ahead, any further Brexit uncertainty is likely to cause Sterling (GBP) to slump against the Australian Dollar (AUD).

While it is not expected MPs will vote in favour of an early general election, if Boris Johnson continues to push for an election it is likely the increased Brexit uncertainty will cause Pound sentiment to slide.

Looking ahead to Tuesday, the ‘Aussie’ could slide against the Pound following a speech from the Reserve Bank of Australia’s (RBA) Governor Philip Lowe.

If Lowe mentions monetary policy, and his tone is overly dovish, the Pound Australian Dollar (GBP/AUD) exchange rate could be left flat.

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