Pound traders have recently been rattled by a Brexit update, which highlighted UK-EU differences. In the future, progress in talks may see Sterling claw back some gains against the Australian Dollar.
Pound Predictions: Brexit Breakthrough may Trigger GBP Rally
The latest Brexit update has done more harm than good to the Pound, but ongoing negotiations could still trigger a Sterling rebound.
On July 20th, Brexit Secretary David Davis and EU Chief Brexit Negotiator Michel Barnier delivered a joint press conference.
Davis was largely optimistic about how talks had been going, but Barnier delivered a more cautious summary. Commenting on continuing issues between the two debating teams, Barnier said;
‘We require clarification on the financial settlement, on citizens’ rights, on Ireland – with the two key points of the common travel area and the Good Friday Agreement – and the other separation issues where this week’s experience has quite simply shown we make better progress where our respective positions are clear’.
If UK negotiators take this statement to heart and open up about their wants and needs with EU officials then a breakthrough could be made in Brexit talks.
This might lead to a sharp Pound appreciation, as it would open the door to actual negotiating progress and possible agreements on citizens’ rights, a contentious issue at present. In Davis’ words, however;
‘Clearly there’s a lot left to talk about and further work before we can resolve this. Ultimately, getting to a solution will require flexibility from both sides’.
Australian Dollar Outlook: AUD Surge Possible if RBA Changes Tune on Interest Rates
In recent AU news, the Australian Dollar has crashed after a statement from Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle.
Speaking at an event in Adelaide, Debelle poured cold water on trader hopes for a near-term interest rate hike. Initially, RBA minutes had mentioned raising the neutral rate to 3.5%; at this level, further interest rate hikes would fail to have much effect.
This triggered an initial Australian Dollar surge, as traders interpreted this as a sign that interest rates could rise in the near-term.
As interest rate odds are still a strong influencer of the Australian Dollar, indications that rates could be rising may restore the AUD GBP exchange rate.
In particular, if RBA Governor Philip Lowe delivers a statement backing future RBA interest rate hikes, Debelle’s comments may be overruled and the Australian Dollar could rally.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.6417 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.6090.
Comments are closed.