Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Edges Higher as UK Sets End-of-Summer Brexit Deadline
UPDATE: The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rose by around 0.3% on Monday afternoon. This left the pairing trading at around AU$1.8330.
During today’s UK-EU Brexit talks, Prime Minister Boris Johnson set an end-of-summer deadline with the EU.
However, Johnson has warned that there must be a ‘level playing field’.
In a joint statement issued after the talks, both the UK and EU ‘welcomed the constructive discussions on the future relationship that had taken place.’
The statement also said:
‘The parties agreed nevertheless that new momentum was required.’
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Rallies as Markets Fear Second Coronavirus Spike
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rallied by 0.7% on Monday morning. This left the pairing trading at around AU$1.83583.
The Australian Dollar slumped against the Pound this morning on fears of a second wave of the coronavirus in Beijing.
Investors sold off currencies sensitive to risk such as the ‘Aussie’ as Beijing recorded dozens of new Covid-19 cases all linked to a major wholesale food market.
Already-cautious traders are also monitoring a spike in cases in the United States. Fears that another spike in cases could cause further damage to the global economy increased, dampening market sentiment.
With global market activity only just picking up after the pandemic throttled growth, another large outbreak could send traders flocking back to safe-haven currencies.
According to Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo:
‘There’s talk that hedge funds and other short-term speculators came into the market early to sell the Australian dollar because of the new infections in Beijing.
‘Hopefully this will not be a big outbreak, and this downward move will not last long.’
China’s capital had previously gone for around two months with very few infections and hospitalisations as officials continued to push forward with plans to reopen economies.
Sterling (GBP) Rises despite Post-Brexit Stalemate
Meanwhile, the Pound was able to rally against the ‘Aussie’, although gains were limited as traders continued to worry about Brexit.
GBP struggled after a report revealed that British officials told their EU counterparts they will not extend the current deadline for trade talks beyond December.
Many investors worry that the county’s economy could be thrown in at the deep end if the UK does not agree new trade terms with the EU.
The Prime Minister Boris Johnson is due to have a call with the EU’s President Ursula von der Layen to try and to break the current stalemate.
Added to this, Sterling traders remain cautious ahead of this week’s Bank of England (BoE) monetary policy meeting.
The BoE is expected to increase its quantitative easing programme by around £100 billion, although some analysts expect the bank to announce an even bigger boost on concerns about future growth.
Pound Australian Dollar Outlook: RBA Meeting Minutes in Focus
Looking ahead, the Australian Dollar (AUD) could slide further against the Pound (GBP) following the release of the Reserve Bank of Australia’s (RBA) meeting minutes.
If the RBA’s minutes are overly dovish about a recovery from the coronavirus crisis, the ‘Aussie’ will slump further.
Meanwhile, traders will be focused on Britain’s labour market statistics due on Tuesday morning which could limit any GBP gains.
If data shows the county’s unemployment rate rose higher than expected in April while average earnings post the lowest increase in around five years, the Pound Australian Dollar (GBP/AUD) exchange rate will remain flat.