Pound to Australian Dollar – Sterling Outlook Uncertain as Brexit Negotiations Reach Endgame

The pound has slipped lower against the Australian dollar this week with rates now sitting well below 1.80 for the pound to Australian dollar pair.

Brexit key for pound to Australian dollar rate

Brexit is likely to remain the biggest driver for the pound to Australian dollar rate this week after UK Prime Minister Theresa May made a speech last night which signalled optimism that a deal on Brexit could be reached whilst the talks continued overnight.

She said that talks were immensely difficult but were now in the endgame with 95% of the withdrawal agreement in place. A cabinet meeting will take place today where Theresa May will update her cabinet on the current state of Brexit negotiations and the main obstacles to reaching a deal. The biggest issue revolves around whether Britain can withdraw from the customs union in the future or whether the UK must be bound by the European Court of Justice with the Irish border causing the issue.

Will an EU Summit to agree a Brexit deal be called?

The markets are eagerly awaiting confirmation of whether or not a proposed emergency EU summit will go ahead later this month and the outcome will almost certainly redirect pound to Australian dollar exchange rates.

If the EU summit goes ahead then this should be seen as a sign of confidence and there would likely be gains for GBP to AUD. However if no agreement can be reached on the Irish border issue then the pound is likely to fall lower as the prospect of a no deal scenario begins to look more likely.

We are getting close to make or break time and this could present considerable opportunity for those with pending Australian dollar requirements whether buying or selling Australian dollars. Any more cabinet resignations following on from Jo Johnson’s departure on Friday could see further weakness for the pound to Australian dollar pair.

Economic events that could affect the pound to Australian dollar rate this week

UK unemployment data this morning is expected to remain at impressive levels and at the lowest since the 1970’s at 4% which could also lend support to sterling. With a quieter economic calendar down under the Australian dollar is likely to see movement on any developments on any future trade deal between the US and China. There have been rumours that both sides are exploring ways to move forward to agree a trade deal which could prove beneficial for the Australian dollar if and when it materialises.

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