Pound to Australian Dollar (GBP/AUD) Exchange Rate Rises ahead of Brexit Talks at EU Summit

October 15, 2020 - Written by John Cameron

STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Rises ahead of Brexit Talks at EU Summit

GBP/AUD Exchange Rate Edges Higher as Hopes Grow on Brexit Developments

The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.4% this morning, with the pairing currently fluctuating around AU$1.830.

Sterling rose today ahead of the European Union’s Summit which will see both Brexit and the Covid-19 pandemic discussed.

As a result, GBP investors are hopeful that some progress could be made towards a post-Brexit trade deal.

However, Michel Barnier, the EU’s Chief Negotiator, has said that talks are not yet ready to enter their final phase.

GBP investors are also remaining cautious after Prime Minister Boris Johnson previously threatened to turn away from Brexit talks if sufficient progress had not been made by October 15th.

A spokesperson for Number 10 said:

‘[The PM] expressed his disappointment that more progress had not been made over the past two weeks.

‘The prime minister said that he looked forward to hearing the outcome of the European Council and would reflect before setting out the UK's next steps.’

The UK’s coronavirus situation remains in focus today, with London due to enter Tier Two this evening.

Consequently, GBP investors are becoming increasingly downbeat about Britain’s struggling economy, which is only expected to get worse in the winter months.

Australian Dollar (AUD) Falls as Australian Unemployment Rises in September

The Australian Dollar (AUD) fell today following the release of September’s Australian Unemployment Rate, which rose by 6.9%.

Callam Pickering, APAC economist at the job site Indeed, commented:

‘The worst may be behind us but the challenges that await us are still greater than anything we have experienced in the past three decades.’

Meanwhile, the ‘Aussie’ has also suffered following this week’s news that the pharmaceutical giant, Johnson and Johnson, had paused clinical trials of a Covid-19 vaccine.

Added to this, China’s cancellation of orders of Australian coal have also sparked concerns for the future of the nation’s economy.

Mike Henry, the Chief Executive at BHP, said that the coronavirus pandemic had made the outlook for commodities uncertain. However, he added:

‘[T]he strength and consistency of the economic recovery underway in China does provide a measure of confidence and optimism.’

Consequently, AUD investors are becoming more hopeful that coal orders could return to normal as China’s economy – the second largest in the world – recovers from the Covid-19 pandemic.

GBP/AUD Forecast: Could Rising UK Covid-19 Infection Rates Drag Down Sterling?

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of August’s Australian HIA New Home Sales. Any improvement in Australia’s economy would prove AUD-positive.

However, the ‘Aussie’ will remain sensitive to global risk sentiment this week. If China’s economy continues to show signs of improvement, we could see the AUD/GBP exchange rate head higher.

US political developments will also remain in focus. Any further uncertainties ahead of November’s presidential election would be AUD-negative.

Sterling could edge higher this week if UK-EU trade talks show progress towards a post-Brexit trade deal.

The GBP/AUD exchange rate will also remain sensitive to the UK’s Covid-19 situation. If any other cities or counties entire a higher Tier in lockdown restrictions, then the Pound would fall.

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