Although Brexit talks are no closer to being concluded, the Pound to Australian Dollar exchange rate has still improved on Tuesday.
Earlier in the day, the Pound traded in the pairing in the region of 1.7549. This initial rate has since risen to the benefit of GBP, pushing the pairing up to 1.7676.
This slight improvement might be down to the DUP outlining just why it rejected Monday’s Brexit deal, which provides an opportunity to address these concerns.
In a nutshell, the DUP appears to fear that leaving Northern Ireland with more EU ties than the UK will make it vulnerable to pressure from the ‘aggressive’ Irish government.
(First published December 5th, 2017)
The Pound has seen a dramatic -1% drop against the Australian Dollar recently, owing to growing uncertainty about the next development in Brexit talks.
This GBP weakness stems from the failure of UK negotiators to make real progress in Irish border talks, leaving a solution before Christmas in doubt.
Pound to Australian Dollar Rally might Occur on Brexit Breakthrough
In a recurrent situation for Pound traders, the future value of the UK currency remains tied to the state of Brexit negotiations.
The GBP/AUD exchange rate has remained volatile recently, owing to growing uncertainty about whether the UK can progress in Brexit talks.
It had seemed like the UK might reach an Irish border agreement on Monday, but Democratic Unionist Party (DUP) MPs soon shut down these hopes.
UK Prime Minister Theresa May is thought to be conducting urgent reconciliation talks with Irish officials involved in the dispute, which could trigger a near-term Pound rise.
In the event that May manages to unify Conservative and DUP opinions about the Irish border, the Pound could see a substantial advance against the Australian Dollar.
Problematically, however, the DUP position on Brexit appears to be even more hardline than the Conservative’s stance, which might present difficulty in reaching an agreement.
This might just be the first of many DUP objections in the Brexit process, so Pound turbulence over Brexit issues could become a regular occurrence from now on.
RBA Rate Hike Hints could Push AUD/GBP Rate Higher
The Reserve Bank of Australia (RBA) has been responsible for a recent Australian Dollar advance and could trigger further AUD/GBP gains further ahead.
The last RBA interest rate decision of 2017 saw policymakers leave rates untouched at 1.50%, although they were otherwise optimistic about the state of the economy.
Commenting on present conditions, RBA Governor Philip Lowe said;
‘The various forward-looking indicators continue to point to solid growth in employment over the period ahead.
There are reports that some employers are finding it more difficult to hire workers with the necessary skills. However, wage growth remains low.
This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time’.
Slow wage growth has long been an issue for RBA officials, so any reduction in the future could raise the chances of a 2018 RBA interest rate hike.
If wage growth improves in the future and is accompanied by pro-rate hike remarks from policymakers, the Australian Dollar could rise sharply against the Pound.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.7549 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5697.