The AUD has come under increasing pressure over recent weeks, with the Pound now trading around 1.87.
GBP has regained approximately 5 cents in the past few weeks, which is the equivalent of an additional 5000 AUD on 100k GBP/AUD currency exchange.
The Pound has made these inroads despite the on-going uncertainty surrounding Brexit. With the UK’s current exit deadline fast approaching, we still do not have any clarity on what the final outcome will be and this in itself you could argue, should be restricting any major improvement for GBP.
It seems as though the markets have spiked on the back of Parliaments decision last week, to move away from a no-deal Brexit outcome. However, unless UK Prime Minster Theresa May can convince MP’s to vote on her Brexit deal at the third time of asking, then an extension to Article 50 looks like the only remaining option.
How long any prospective extension might be is now what the markets will likely focus on and any further improvements for the Pound, will likely be impacted by this decision. With rumours of a two-year extension being floated, how will investors and the public react to such a scenario?
If an extension is granted without any indication of an agreement being virtually in place, then investor confidence could take a hit. It is likely to be followed my major public unrest, with people seemingly losing patience with the on-going saga.
Looking at the Australian economy and with concerns over falling house prices and a slowdown in global trade, investors seem to be shying away from the once popular AUD.
Add this to concerns that the Reserve Bank of Australia (RBA) will look to cut interest rates possibly twice this year and it is easier to understand why the Pound has made inroads against the AUD of late, despite investors remaining cautious about the Pound and its future prospects.
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