Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Rises on Barnier’s Upbeat Comments
UPDATE: The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rose 0.3% on Monday afternoon. This left the pairing trading at around AU$1.8058.
The Pound received an upswing of support after the European Union’s chief Brexit negotiator expressed confidence in a closed-door meeting.
The reports were in stark contrast to the dire assessment he delivered at the end of last week.
Diplomatic sources told Reuters that Michel Barnier expressed confidence that a deal with Britain was possible.
According to sources present at the closed-door meeting, Barnier said:
‘I remain confident that a balanced and sustainable deal remains possible, even if less ambitious.’
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted on Increased Probability of a No-Deal Brexit
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained flat, leaving the pairing trading at around AU$1.8024.
The Pound remained flat against the ‘Aussie’ as the British currency lacked major drivers of its own. A weaker US Dollar and pessimism over the next round of Brexit negotiations left investors cautious today.
In a note to clients, Petr Krpata, currency and rates strategist at ING wrote:
‘It should be more of the same for GBP this week. It is a very quiet week on the UK data front with the currency to remain the laggard and the underperformer in the European G10 FX space.
‘With news headlines suggesting an increased perceived probability of no deal, there is a little to be optimistic about for GBP.’
Australian Dollar (AUD) Flat as Geopolitical Tensions Increase
The ‘Aussie’ remained flat today as market sentiment was clouded by growing coronavirus cases and geopolitical tensions.
Relations between the United States and China continued to deteriorate as Beijing revealed it had taken over the premises of the US consulate in Chengdu.
Investors also began to fret over the deadlock in the US over the next round of fiscal stimulus. The deadline for the end of the month is looming as Congress is expected to extend some unemployment benefits.
The Senate Republicans and White House have agreed on a $1 trillion package, however this needs to be negotiated in the Senate. The risk-sensitive AUD remained under pressure as the Democrats have been pushing for more spending.
According to Steve Englander, head of G10 FX research at Standard Chartered in New York:
‘Failure to pass additional fiscal measures or a minimalist bill will likely generate a significant shock to markets.
‘We expect a big stimulus package that probably will reflect Democratic priorities on income support and spending.’
However, the Australian Dollar did receive some support after a senior official at the Reserve Bank of Australia (RBA) said new monetary policy measures would come at a cost. He noted that these are not currently under consideration.
The bank’s Assistant Governor, Chris Kent also noted that negative interest rates were not an option for the RBA.
Pound Australian Dollar Outlook: UK-EU Talks and US-China Tensions in Focus
Looking ahead, the Australian Dollar (AUD) could slump against the Pound (GBP) if US-China tensions heighten this week.
If the US retaliate to China’s closing of their consulate in Chengdu, it will weigh on the risk-sensitive ‘Aussie’.
However, Sterling gains could be limited as traders eye the next round of UK-EU trade talks which are expected to continue this week.
If reports reveal that Britain is still unwilling to make attempts to overcome the current impasse in talks, the Pound Australian Dollar (GBP/AUD) exchange rate will remain flat.