Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks After Last Night’s Post-Referendum Gains

December 13, 2019 – Written by John Cameron

GBP/AUD Exchange Rate Eases as Markets Await Conservative’s Next Moves

The Pound Australian Dollar (GBP/AUD) exchange rate eased by -0.4% today following last night’s surge after it was announced that the Conservatives had successfully secured a landslide majority in the general election.

Guy Foster, Head of Research at Brewin Dolphin, was cautious, however, saying:

[T]he potential for a smooth Brexit removes some of the downside risks for the UK economy.

[However, this is still], after all, just the beginning of the exit process. Even with the passing of the withdrawal agreement, the UK could still leave the EU without a deal at the end of 2020 if trade negotiations don’t proceed successfully.

Markets reacted positively to the Conservative victory last night, seeing a functioning majority for the Tories are offering the UK some stability over Brexit and allowing Parliament to move beyond the shadow of political uncertainty into the New Year.

UK political developments will remain firmly in focus today, with investors awaiting the Conservative Party’s next steps.

AUD/GBP Exchange Rate Edges Higher on US-China Trade Deal Hopes

The Australian Dollar (AUD) has benefited from reports of a ‘phase one’ US-China trade deal after US President Donald Trump said that a deal between the two superpowers was now ‘very close’.

Jennifer Hillman, a senior fellow at the Council on Foreign Relations, recommended a degree of scepticism, however, saying:

‘This should NOT be described as a trade agreement. It is a purchase and sale agreement that does virtually nothing to address substantive concerns of US ([and the] rest of the world) with China’s trade practices.’

With China being Australia’s largest economy, and the ‘Aussie’ being primarily commodity-backed, positive US-China trade news has provided some uplift for the AUD/GBP exchange rate today.

There are no notable Australian economic data releases today, with ‘Aussie’ traders focusing on US-China trade developments instead.

GBP/AUD Outlook: Conservative Party’s Next Move in Focus

Australian Dollar (AUD) investors will be looking ahead to Sunday’s publication of Australia’s flash Commonwealth Bank Manufacturing PMI for December, which is expected to emerge out of contraction territory from 49.9 to 50.4.

US-China trade developments will also continue to drive the AUD/GBP exchange rate into next week, with any indications of an imminent ‘phase one’ trade deal being inked in before the New Year being AUD-positive.

Sterling traders, meanwhile, will be awaiting Monday’s release of December’s UK Markit Services PMI figure, with any signs of rising out of contraction territory proving Pound-positive.

UK political developments will remain in the spotlight next week, with the Conservative Party expected to continue to push forward with Brexit and layout its next steps after last night’s victory.

We could see the GBP/AUD exchange rate edge higher if there is further clarity on Brexit in the weeks ahead.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts