GBP/AUD UPDATE #2: The Pound to Australian Dollar (GBP/AUD) exchange rate held steady on Monday afternoon, with the pairing holding close to AU$1.8395 ahead of a Brexit vote taking place later in the evening.
GBP investors are hopeful that the latest round of indicatives votes, will see MPs finally reach an agreement of how to proceed with Brexit, with speculation this will result in Parliament backing a customs union with the EU.
This helped to reverse the pairing’s losses from earlier in the session after the Australian Dollar was bolstered by some better-than-expected Chinese data.
GBP/AUD UPDATE #1: Despite an abundance of Brexit uncertainty and a rebounding Chinese manufacturing PMI, the British Pound to Australian Dollar exchange rate edged higher in early Monday trading with the cross last seen closing the bearish gap open to trade at AU$1.83466.
It’s an extremely busy week in the FX sphere with Brexit, US-China trade talks and the latest Reserve Bank of Australia monetary policy review set to be the major themes for the week while a host of economic data releases are also expected.
Monday will see the latest UK manufacturing PMI with the index expected to dip to 51.2 but the main focus of the session is likely to be the next round of indicative Brexit votes with MPs scrambling to secure an alternative to May’s thrice-rejected EU withdrawal agreement.
GBP/AUD FORECAST: Last week the Pound to Australian Dollar exchange rates slipped on Brexit pessimism as Prime Minister Theresa May spent Sunday in crisis meetings attempting to secure support for her deal.
Meanwhile, fears of a potential recession in the US increased as another part of the US yield curve inverted for the first time since 2007.
The Australian yield curve mirrored the US curve, which may suggest the Reserve Bank of Australia (RBA) may be about to cut interest rates.
After seizing control of the Brexit process, the House of Commons failed to reach a consensus following Wednesday night’s indicative votes, and following this the pairing fell.
Meanwhile, the Australian Dollar slipped after the Reserve Bank of New Zealand (RBNZ) adopted an easing bias, suggesting they may cut interest rates in the future.
This has increased speculation that the RBA may cut interest rates in 2019 despite the central bank holding a neutral outlook, however this could do little to stop the pairing slide on Brexit pessimism.
The pairing continued to fall towards the end of the week, with Brexit weighed on the UK currency as MPs were stuck in deadlock.
Sterling received a slight boost following Theresa May’s announcement that if MPs voted through her Brexit deal she would resign as Prime Minister.
Meanwhile the Australian Dollar was boosted by an increase in risk appetite following reports that the US and China had made progress during trade discussions.
On Friday US Treasury Secretary Steven Mnuchin said he and Trade Representative Robert Lighthizer had concluded ‘constructive’ trade talks in Beijing last week and would be looking forward to further trade talks.
The pairing continued to slide on Friday afternoon as Theresa May’s Brexit deal was put to a vote for the third time.
MPs rejected the Prime Minister’s deal, meaning the UK missed an EU deadline to delay Brexit to 22 May and leave the European Union with a deal.
