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Pound Sterling to Australian Dollar Exchange Rate Climbs on Brexit Delay Speculation

Pound to Australian Dollar Exchange Rate Gains despite Anticipation for Tuesday Brexit Vote

Despite market fears that Tuesday’s highly anticipated UK Parliament Brexit vote will fail, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate rebounded slightly when markets opened on Monday morning.

Last week, Brexit uncertainties and higher risk-sentiment left GBP/AUD tumbling for most of the week. GBP/AUD opened the week at the level of 1.7875, before sliding and briefly hitting a low of 1.7620 on Friday morning.

However, GBP/AUD recovered on Friday and closed the week nearer the level of 1.7788. At the time of writing GBP/AUD had recovered some of last week’s losses already and trends closer to the level of 1.7838.

Demand for the Pound (GBP) rose on Monday morning as investors reacted to the latest Brexit speculation, despite there only being a day to go until the UK government’s position on Brexit will presumably be defeated in UK Parliament.

Pound to Australian Dollar exchange rate gains were limited by this uncertainty, but the pair’s gains were made easier as the Australian Dollar (AUD) was pressured by weak Chinese data.

Pound (GBP) Exchange Rates Bolstered as EU Prepares to Delay Brexit Process

On the eve of UK Parliament’s highly anticipated vote on UK Prime Minister Theresa May’s Brexit deal, the Pound (GBP) saw stronger demand amid reports that the EU was preparing to allow the formal Brexit process date to be delayed.

According to reports, the EU expects that UK Prime Minister May’s negotiated deal will fail to pass through into UK law, and expects the UK to ask for a formal extension to Article 50 soon.

The EU is reportedly prepared to delay the Brexit process until at least July in order to give the UK more time to find a resolution on how it wants the Brexit process to unfold.

An EU official said:

‘Should the Prime Minister survive and inform us that she needs more time to win round Parliament to a deal, a technical extension up to July will be offered.’

On top of this, as UK Prime Minister May makes last-ditch attempts to bolster the popularity of her Brexit deal, she has indicated that no Brexit at all is more likely than a No-deal Brexit.

Sterling’s gains are limited overall though, as investors are anxious ahead of Tuesday’s UK Parliament vote.

Australian Dollar (AUD) Exchange Rate Fails to Hold Ground amid Weaker Chinese Data

For much of the past week, the Australian Dollar (AUD) has been supported by market demand for risky trade-correlated currencies, amid weakness in the safe haven US Dollar (USD), as well as progress in US-China trade negotiations.

However, when markets opened on Monday the Australian Dollar briefly tumbled as investors sold the currency following last week’s strong performance.

A combination of profit-taking from the Australian Dollar’s highs, as well as some weak trade data from China, left the ‘Aussie’ unappealing when markets opened.

China’s latest exports and imports figures both showed surprisingly deep contractions in December, coming in well below analyst expectations.

As the Australian Dollar is often used as a proxy for Chinese economic sentiment, the Australian Dollar weakened. This made it easier for the Pound to advance.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook to be influenced by Brexit Vote

UK Parliament’s key vote on whether or not the UK government’s negotiated UK-EU Brexit withdrawal deal will be accepted into UK law will finally take place tomorrow.

After being delayed in December as UK Prime Minister Theresa May attempted to secure more support for the deal, analysts still expect the deal will fail to pass.

Without enough support to pass the Brexit withdrawal deal, this would leave the UK government at a crossroads regarding how to handle the Brexit process going forwards.

Depending on the path the Brexit process takes next, the Pound outlook could change significantly. In the event of a No-deal Brexit for example, the Pound would plunge. A general election could also make the Pound weaken further.

On the other hand though, Sterling would rise if a second EU referendum were to become more likely.

Tuesday will see the publication of Australia’s January consumer inflation expectations results, with consumer confidence and home loans data due later in the week.

The Pound to Australian Dollar (GBP/AUD) exchange rate outlook may be in for a significant shift in tone in the coming days.