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GBP to AUD Exchange Rate Stuck At One-Year-Worst as Pound Struggles amid No-Deal Brexit Fears

September 10, 2020 - Written by Toni Johnson

The Pound has been attempting to steady slightly higher since yesterday, following days of being throttled by no-deal Brexit fears dominating markets. Investors have also continued to find the Australian Dollar fairly appealing, amid lingering demand for risk-taking. Looking ahead to tomorrow, upcoming UK growth rate news would be typically influential for the Pound. However with no-deal Brexit fears returning to the forefront of Sterling trade, its impact may be limited.

GBP/AUD briefly saw a rebound last week, as investors pulled back on the strong Australian Dollar. However, while GBP/AUD opened this week high in the region of 1.8230, the pair has been tumbling since markets opened on Monday.

After shedding a shocking four cents, GBP/AUD touched on lows yesterday. While GBP/AUD has attempted to recover, the pair has only seen further losses today. At the time of writing, GBP/AUD is trending near lows of 1.7743, its worst levels in over a year, since August 2019.

GBP Exchange Rates Continue to Tumble on Intensifying No-Deal Brexit Fears

The Pound has been tumbling for most of the week, as no-deal Brexit fears return to focus for Pound investors following months of Brexit fears being left in the background by a focus on the coronavirus pandemic.

At the beginning of the week, the Pound was hit by reports that the UK government planned to rewrite its Brexit withdrawal agreement.

The move was seen as undermining trust in UK-EU relations. Many critics said that it would threaten Brexit negotiations, especially after it was pointed out that the move was illegal.

The Pound’s losses briefly slowed yesterday after EU officials said that negotiations would continue despite the move.

However, speculation has risen today that the EU has decided to call Britain’s move a breach of the withdrawal agreement. Leaked comments suggest this could lead to sanctions.

The leaked legal opinion from the European Commission reportedly said:

‘Already by tabling the draft bill and pursuing the policy expressed therein, the UK government is in violation of the good faith obligation under the withdrawal agreement (article 5) because this bill jeopardises the attainment of the objectives of the agreement,’

This news kept the Pound tumbling even deeper, despite the currency’s brief rebound attempt last night and this morning.

AUD Exchange Rates Remain Appealing among Risk-Correlated Currencies

The Australian Dollar has done a fairly good job of holding its ground against the Pound this week, despite the market’s appetite for risk gradually dwindling.

Reviving coronavirus pandemic fears, no-deal Brexit anxiety, and fresh US-China trade tensions, have all left investors more eager to buy safe haven currencies instead.

However, the relatively risk-correlated Australian Dollar has been able to keep seeing fairly resilient movement in recent sessions.

This is because the ‘Aussie’ is among the most appealing risk-correlated currencies, helping the currency to keep benefitting from lingering economic recovery hopes and risk-sentiment.

As a result, AUD continued to be among the market’s best-performing major currencies today. Investors

GBP/AUD Exchange Rate Forecast: Brexit Concerns Persist, Will AUD Strength Persist Too?

Investors may continue to sell the Pound if a no-deal Brexit continues to look more and more likely to markets.

UK-EU Brexit negotiations will be closely watched. Any signs that relations will recover could help the Pound to recover some losses, but signs of negotiations collapsing will only lead to deeper Pound losses.

However, GBP/AUD may avoid losses more easily if the Australian Dollar weakens as well.

While lingering risk-sentiment is buoying AUD, some analysts point out there are still a lot of downside risks in the currency’s outlook.

According to Analysts at Rabobank:

‘In view of the economic slack in the Australian economy, it is possible that policy makers will want to shake off the reputation of being the least dovish central bank in the G10 in the coming months. Layered on top of these arguments are concerns about the economic impact of the drawn out lockdown in Melbourne and from the testy relations between Canberra and Beijing. All these factors could conceivably weigh on AUD/USD in the coming months’

Amid a lack of notable Australian data due tomorrow, the Pound to Australian Dollar exchange rate’s late-week movement could be driven by upcoming UK growth data or potential Brexit developments.
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