Pound to Australian Dollar Exchange Rate Climbs as Investors Bet on Brexit Delay
Despite rising hopes that the US and China are getting closer to reaching some kind of agreement on trade, higher risk-sentiment has not been enough to keep the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate from surging.
After opening this week at the level of 1.8316, GBP/AUD slipped yesterday to a low of 1.8198 as the Australian Dollar (AUD) benefitted from risk-sentiment.
Today though, GBP/AUD regained all of those losses and jumped further, climbing over two cents and trending close to a high of 1.8479 at the time of writing.
This was the best GBP/AUD level since January – the best in over a month.
The primary cause for the latest rise in Pound (GBP) demand was rising hopes that the UK government could officially delay the formal Brexit date past its current date of March 29th.
Pound (GBP) Exchange Rate Outlook Would Rise on Brexit Delay
Investors piled into the Pound today, as market bets that the UK government would delay the Brexit process bolstered the British currency’s outlook.
As rumours that a Brexit delay is on the way gain pace, investors are pricing a delay into the Pound and this is the primary reason for the Pound’s recent strength.
However, a Brexit delay amounts to kicking the can down the road and its effect on the Pound will be limited.
The Pound outlook does have the potential for further gains if a No-deal Brexit becomes less likely or if the chances of a second referendum rise though.
Both the UK government and the opposition Labour Party are showing signs of shifting tones regarding Brexit. Speculation is rising that the government could oppose a No-deal Brexit and the Labour Party has revealed that it favours a second referendum.
Australian Dollar (AUD) Exchange Rate Strength Lightens on Mixed Risk-Sentiment
At the beginning of the week, investors piled into the Australian Dollar and other risky trade-correlated currencies thanks to news that US President Donald Trump had delayed the next round of US trade tariffs on China.
The delay was to allow for more time in US-China trade negotiations, a sign that officials were confident that a deal could be within sight.
Hopes that trade tensions between the US and China could be resolved have made investors more willing to take risks and have been the primary cause of Australian Dollar strength this week so far.
However, market anticipation for an upcoming testimony from Federal Reserve Chairman Jerome Powell limited risk-sentiment, making it slightly easier for GBP/AUD to rise today.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook Would Surge on Soft Brexit News
The next few sessions could be highly influential for the Pound outlook, if there are any surprising Brexit developments.
With just over a month until the Brexit is set to take place, the Pound could see some relief if the UK government indicates it will delay the Brexit date.
The Pound outlook would rise even further if the government indicates it will take other measures to prevent a No-deal Brexit from becoming reality.
With the opposition Labour Party supporting a second referendum under certain conditions, the Pound outlook will also rise if the chances of a second referendum of some kind look more likely.
The Australian Dollar, on the other hand, is more likely to be driven by upcoming data and Central Bank news.
Australian construction data from Q4 will be published on Wednesday, followed by housing data on Thursday and manufacturing stats on Friday. If they beat expectations the Australian Dollar will see stronger supper.
Upcoming testimonies from Federal Reserve Chairman Jerome Powell would further bolster Australian Dollar demand if they make investors more willing to take risks.
Failing that, developments in US-China trade negotiations will also continue to influence the Pound to Australian Dollar (GBP/AUD) exchange rate.