GBP/AUD rates have levelled out this week, with the AUD finding plenty of support around 1.75.
The Pound’s recent strength has cooled and although the UK economy remains under pressure, the AUD is also struggling to make any major impact.
Looking at Sterling at its downturn in fortunes has come despite the recent announcement that EU leaders have agreed to move Brexit talks on to the second phase.
The news, which was confirmed by European Council president Donald Tusk, finally put to rest any concerns investors had that talks were still not progressing as indicated.
Many analysts had predicted that this could help alleviate further pressure on the Pound, which in turn could have driven support higher and the Pounds value up as a result.
However, the opposite seems to have occurred and investor confidence has waned. This is likely due to how tough the next round of Brexit talks are predicted to be and the potential obstacles that could harm any separation deal being agreed.
We are now entering the key components of the UK’s separation from the EU and the relationships that will remain, particularly in terms of what trade deal the UK will be granted with its closest neighbours.
We are likely to see tensions rise and I would be surprised if this didn’t have a negative impact on Sterling’s value over the coming months. The first round of negotiations were far more tedious than most experts had predicted and it does make you concerned about how the UK government will navigate the second phase of talks.
Despite this current negative perception the AUD is also under pressure, as Australia’s current housing bubble is set burst. High property prices in Australia’s most affluent areas becoming too expensive for most people to purchase and with a slowdown in their exports (Australia relies heavily on this sector of its economy), could the AUD be in for a rough ride in 2018?
Personally, I would be tempted to remove any market risk considering the uncertainty in both the UK & Australian economies and secure any short to medium-term currency positions whilst Sterling continues to trade above 1.70.
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