GBP/AUD – GBP/AUD again has fallen below the key resistance point 1.80. This was due to news Theresa May lacks support from the cabinet to push her Brexit plan through. It seems that every time the UK on the cusp of a deal there is a problem created not only from Brussels, but also from inner fighting within parliament.
It seems the Chequers plan was reluctantly backed in the first place due to the need for progress and the threat of a no deal. The backing of the deal has been described as a deeply undesirable compromise. A minster said that most of those who backed the deal did so “with a very heavy heart”.
Two cabinet ministers last night announced on the BBC that there is little chance that the current deal would get through parliament and the Theresa May still pursuing agreement on the is deal could be considered “self harming”.
Even if a deal is agreed with Brussels the deal must then be voted through by the cabinet in January.
The EU withdrawal Act of 2018 highlights that the government must announce before 21st January if it can or cannot reach a deal. If the date in not met the government will have 5 days to make a statement outlining how the UK wishes to proceed and subsequent arrangements for the motion to be passed through parliament.
Despite all this news I am still of the opinion a deal will be reached despite all the in house fighting, the consequences of not getting a deal is simply too great. Talks are intensifying and if there is solid news on the Irish Border I think we could see a Sterling rally. If you are looking at risk reward and are selling the Australian Dollar I would not hesitate to take advantage of current levels at 1.78. Pre-Brexit GBP/AUD was 2.20, although I do not expect a rally of this extent I think it is important to remember Sterling is chronically undervalued.
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