We have seen Sterling hit close to its best level to buy Australian Dollars this week on Friday after Australia released Trade Balance data much lower than expected.
After a strong start to the week with positive Australian GDP data as well as strong Chinese data the Trade Balance came out as a big surprise which sent Sterling in a positive direction against the Australian Dollar.
The Pound vs the AUD has been trading between 1.60-1.62 on the Interbank level for quite some time with the occasional break through on either side and it is as if rates are waiting for something to happen before making their mind up which direction to go.
The Pound is struggling to make any real gains at the moment with the uncertainty as to what is happening with the Article 50 discussions. The House of Lords have challenged the recent Brexit bill with a vote to protect rights of Europeans living in the UK of which there are over 3 millions. The Lords also want to have reciprocal rights given to those living and working in Europe.
The recent obstacle means that it is still not clear when Article 50 will be triggered but it’s almost a certainty that it will happen this month.
If we look at what happened to GBPAUD exchange rates with the Brexit vote back in June 2016 it was catastrophic for Sterling with enormous drops against the Aussie Dollar and could we face the similar movements this time round?
Personally I would be surprised as this time there is a clear expectation that Article 50 will happen so it could be argued that it is already priced in. However, what is clear is that volatility will occur in the run up to the trigger and we’re likely see big swings on the currency markets.
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