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GBP to AUD Exchange Rate Rebound May be Limited a Brexit Impasses Persist

December 3, 2020 - Written by James Fuller

Investors are buying the British Pound to Australian Dollar (GBP/AUD) exchange rate today, despite persisting concerns that the Brexit process could end with a no-deal outcome. The risk and trade-correlated Australian Dollar is struggling to push higher, but the Pound’s potential to advance may be limited going forward unless there is some optimistic Brexit development soon.

Since opening this week at the level of 1.8028, GBP/AUD has been trending with an upside bias due to Brexit hopes and the Australian Dollar struggling to hold its best levels.

Gains have been limited though. GBP/AUD briefly rose above last week’s opening levels of 1.8186 yesterday, but has since been trending below them again.

At the time of writing on Thursday, GBP/AUD has been trending over half a cent above the week’s opening levels in the region of 1.8101. Investors are hesitant to move too much on the pair today, as uncertainty persists over Brexit keeping movement in both currencies mixed.

GBP Exchange Rates Boosted by UK Data but No-Deal Brexit Possibility Looms

The Pound is climbing against some strong currencies like the Australian Dollar today.

Sterling is rebounding from near lows against the Australian Dollar, with the help of some strong UK data published in recent sessions.

Markit’s UK PMIs from November beat expectations in many key prints. The data indicated that Britain’s economy has weathered the second coronavirus pandemic lockdown better than expected.

In particular, Pound investors were happy that Britain’s services PMI beat forecasts and came in at 47.6 rather than the projected 45.8. It showed resilience in Britain’s most vital economic sector.

Hopes that the UK and EU are getting closer to reaching a Brexit deal are also keeping the Pound buoyed, though these hopes are mixed and limited.

There have been comments that a deal is possible in the coming days, but also speculation that if negotiations don’t go well then there is a real risk of a no-deal Brexit instead.

According to Charalambos Pissouros, Senior Market Analyst at JFD Group:

‘In such a case, a no-deal Brexit may become an even more realistic outcome and the currency could fall off the cliff,’

AUD Exchange Rates Supported by Strong Data and Market Sentiment

The Australian Dollar continues to be one of the more appealing major currencies on markets recently.

As a risk-correlated currency, it is benefitting from the global rise in coronavirus vaccine hopes, as well as hopes for US fiscal stimulus to help the nation amid the coronavirus crisis.

Australia’s data has also been fairly strong, indicating that the nation has been weathering the coronavirus pandemic better than some other major economies.

Today’s Australian trade balance data was notably better than expected, with a bigger than expected trade balance and exports hitting 5% month-on-month.

Reserve Bank of Australia (RBA) Governor Philip Lowe said that Australia’s economy was recovering better than expected so far, but uncertainty persisted. He said:

‘There is still a high degree of uncertainty about the outlook,

We are prepared to do more, if that is required. Having said that, we are still of the view that a negative policy interest rate in Australia is extraordinarily unlikely.’

GBP/AUD Exchange Rate Forecast: Brexit and Australian Retail Report in Focus

The Pound to Australian Dollar is likely to keep struggling to advance unless there are positive developments over the Brexit process.

If the UK and EU get closer to a deal, the Pound could see a more solid rise in demand that could help GBP/AUD to sustain gains.

On the other hand though, the Pound could shed recent advance attempts if there are no developments or if no-deal Brexit fears rise.

As for the Australian Dollar, it is likely to remain sensitive to shifts in risk-sentiment. If market sentiment stays positive, the ‘Aussie’ will remain appealing.

A sudden rise in coronavirus or growth jitters could dampen sentiment and the ‘Aussie’ though.

Key Australian retail sales data from October, due during Friday’s Asian session, could also influence the Pound to Australian Dollar exchange rate if it surprises.
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