The Pound to Australian Dollar (GBP/AUD) exchange rate was rangebound this morning, with the pair currently trading around AU$1.798.
Sterling continues to cling on as Brexit talks hit another roadblock, with the transition period deadline looming ever closer.
Boris Johnson will travel to Brussels this week for last minute talks with President of the European Commission Ursula von der Leyen.
Speaking to broadcasters this morning at Guy’s Hospital London, Boris Johnson said:
‘I’m always hopeful, yes, I’m very hopeful, but I’ve got to be honest with you, I think that situation at the moment is very tricky.’
‘Everybody needs to understand that, on any view, there’s going to be change on 1 January. And if we have to come out on Australian terms, as they are called, then we will make sure that we look after everybody in this country, of course.’
As a result, GBP investors have become increasingly nervous as the Downing Street coined term ‘Australian Deal’ does not exist, and so an Australian-style deal is actually no deal, therefore an ‘Australian Deal’ would cause the UK to fall back on the rules of the World Trade Organization (WTO).
Nonetheless, this morning saw the beginning of the coronavirus vaccine rollout, with the first vaccine given in Northern Ireland, which has buoyed hopes for an economic recovery in the coming months and New Year.
Australian Dollar (AUD) Rises on Business Confidence Index
The combination of a soft USD, recovering global economic growth underpinning commodities and highly accommodative monetary policy, continues to support the Australian Dollar.
These factors continue to keep the AUD outlook appealing as well.
The release of the National Australia Bank’s (NAB) Business Conditions saw business conditions and confidence rise in November.
Alan Oster, NAB Group Chief Economist said:
‘In aggregate the business survey saw another large gain in November. Encouragingly, business confidence saw another large rise, driven by an improvement in Victoria. Conditions also saw gains and, importantly, this was evident across most states’.
Furthermore, the latest House Price Index was better than forecast at 0.8% showing a slight growth in Q3, proving positive for the ‘Aussie.’
GBP/AUD Outlook: Brexit to Remain in the Spotlight
Brexit developments will continue to drive the GBP/AUD exchange rate this week, as the deadline for trade talks is now only three weeks away.
Any signs of UK-EU trade talks failing to come to a consensus after Boris Johnson’s trip to Brussels would prove GBP-negative.
Though if Johnson and von der Leyen do come to an agreement, the Pound could be bolstered.
Australian Dollar (AUD) investors will be looking ahead to the Royal Bank of Australia’s (RBA) bulletin and Melbourne Institute (MI) inflation expectations in the coming days.
However, US-China trade tensions could begin to drag down the risk-sensitive Australian Dollar.