Pound to Australian Dollar Exchange Rate Continues Climb on Fresh Brexit Hopes
News that Brexit negotiations had resumed after all sent the Pound to Australian Dollar (GBP/AUD) exchange rate jumping yesterday. The Australian Dollar’s strength on risk-sentiment is being limited by Reserve Bank of Australia (RBA) easing bets.
Last week saw GBP/AUD make an impressive jump from the level of 1.8017 to gain over two cents and close the week at the level of 1.8243. This week’s gains are also looking strong so far, with the pair on track to gain another two cents.
At the time of writing, GBP/AUD is trending in the region of 1.8477. This puts it just below this morning’s high of 1.8525. This morning’s high was the best level for the pair since late-May, almost 5 months ago.
If Brexit optimism continues to rise, the Pound to Australian Dollar exchange rate outlook could surge. This is keeping Brexit developments as the core focus for Pound (GBP) investors looking forward.
Pound (GBP) Exchange Rates Jump on Fresh Round of Brexit Negotiations
Last week, UK officials indicated that they would walk away from UK-EU Brexit negotiations. This was due to the EU’s alleged lack of compromise on certain conditions.
However, Sterling remained fairly strong amid hopes that relations would recover as both sides still want some kind of deal.
Then yesterday, EU Brexit Negotiator Michel Barnier said that he believed a deal was close, and his comments led to fresh optimism from both UK negotiators and markets.
A full new round of negotiations is now expected, and UK and EU officials both expect some kind of deal by mid-November.
According to Neil Wilson, Chief Market Analyst at Markets.com:
‘There has definitely been a narrowing in the gap since the UK shut the door last Friday. This is a positive and indicates that a deal is still more likely than not, though we would be cautious about assuming anything at this stage’
Australian Dollar (AUD) Exchange Rates Doused by Market Uncertainty
The Pound was able to more easily continue its advances against the Australian Dollar (AUD) today, as market sentiment worsened.
While the Australian Dollar has been supported by hopes for US fiscal policy in recent sessions, these hopes are thinning.
On top of this, the coronavirus pandemic is hurting many major economies once again, and the US 2020 Presidential Election draws ever closer.
According to Stephen Innes from AXI:
‘With the pandemic firmly in everybody’s life again and the major macro event of the year just weeks away from its final decision, markets will probably trend more volatile and tack in a defensive manner.’
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook to Focus on Brexit
Hopes for a UK-EU deal to be reached have only risen since the latest round of negotiations was announced. Markets are increasingly hopeful that negotiators walking back to talks is a sign that a deal is still the more likely outcome.
As a result, further developments here are likely to be the focus for the Pound outlook going forward. If Brexit hopes rise further, the Pound likely has further to gain as well.
Of course, any sudden sign of talks collapsing could cause the Pound to shed much of its recent gains instead.
As for the Australian Dollar, it will remain pressured if US political uncertainty and global coronavirus fears drive investors to safe havens.
Data due before the end of the week could influence GBP/AUD as well. Friday will see the publication of Markit’s October PMI projections for both Australia and Britain.
If Australia’s stats beat forecasts, it could boost hopes for Australian economic resilience. This could even soften Reserve Bank of Australia (RBA) easing speculation.
While Brexit will remain the focus, tomorrow’s UK PMI projections could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate if they surprise investors.