GBP/AUD Exchange Rate Drops as Irish Backstop Issue Weakens May’s Deal Ahead of Vote
The Pound Australian Dollar (GBP/AUD) exchange rate plummeted to -1.6% today and is currently trading around AU$ 1.824 on the inter-bank market.
Sterling (GBP) fell against the Australian Dollar (AUD) as Prime Minister Theresa May’s Brexit deal is due to face a parliamentary vote today. Many MPs, however, are critical of the ‘legally binding’ changes to the Irish backstop agreed between the UK and the EU, diminishing the likelihood of May’s deal gaining a majority in the Commons.
This was followed by the Attorney General Geoffrey Cox’s report that inferred that the risk of the UK being stuck in the backstop remained, which saw confidence in the Pound plummet as this compromises May’s deal further.
Cox concluded his legal advice on the matter, saying:
‘[T]he legal risk remains unchanged that if through no such demonstrable failure of either party, but simply because of intractable differences, that situation does arise, the United Kingdom would have… no internationally lawful means of exiting the Protocol’s arrangements, save by agreement.’
The President of the European Commission, Jean-Claude Juncker, put further pressure on Parliament today by saying that ‘there will be no third chance’.
Conservative MP Dominic Grieve remained critical, however, saying that he would not back May’s deal.
Grieve told the BBC Radio 4’s Today programme:
‘It does not allow the UK the right to terminate the backstop at the timing of its own choice.’
The Australian Dollar has benefited against the weakened Pound today, despite poor Australian home loans figures for January, which came in below the consensus of 1.0% and falling by -2.6%.
GBP/AUD Exchange Rate Falls despite Surge in UK GDP Figures
The Pound failed to uplift following the publication of the UK GDP figures for January which soared to 0.5% against December’s -0.4%. Economic data has been generally overshadowed by the Brexit vote today.
John Hawksworth, a Chief Economist at PwC, remained optimistic, saying:
‘There are no signs yet that uncertainty over Brexit has pushed the economy as a whole into recession. If an orderly Brexit can be achieved, then the economy should pick up speed again in the second half of this year.’
These were followed by the publication of the UK industrial production figures for January which also increased to 0.6%.
AUD/GBP Exchange Rate Rises despite Australian Home Lending Figures Falling to Lowest Level Since 2002
Today saw the publication of the Australian investment lending for homes figures for January, which fell by -4.1%.
Ryan Felsman, a Senior Economist at Commsec, commented:
‘The value of lending approvals for home alterations and additions have fallen to the lowest level since records began in July 2002 due to a combination of tightening lending standards, slower home loan approvals due greater scrutiny of household balance sheets, falling property prices and a desire to deleverage.’
Many ‘Aussie’ traders, meanwhile, will be awaiting the publication of the Westpac consumer confidence for March today, and with any signs of an uptick this could see the AUD/GBP exchange rate rise further.
GBP/AUD Outlook: Sterling Could Plummet Further if May’s Deal is Rejected
‘Aussie’ traders will be looking ahead to the publication of the Chinese FDI foreign direct investment figures for February tomorrow, and with China being Australia’s largest trading partner, any signs of an increase could prove beneficial to the Australian Dollar.
GBP investors, meanwhile, will be looking ahead to tomorrow’s important Spring Statement tomorrow, although this will likely be dictated by the tone struck by today’s Brexit vote.
The GBP/AUD exchange rate will remain determined by the outcome of today’s Parliamentary vote on Brexit today, and if Theresa May’s Brexit deal fails to gain a majority in the Commons we could see the Pound plummet further.
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