The Pound has been challenging 1.87 on the Interbank level against the Australian Dollar over the last few days but has struggled to hold on to its gains for any sustained period.
Sterling has made the gains owing to a number of reasons but arguably the two most important factors affecting the Pound vs the Australian Dollar is that of China and Brexit.
The impact of China on the Australian Dollar
China appears to be back tracking on its arrangements with the US in terms of its trading position and this is likely to impact trade between China and Australia. The Trade Wars are still going on between the two superpowers and this is causing a problem for the Australian Dollar.
China is Australia’s largest consumer of its natural resources and as Australia is heavily influenced by commodity prices as well as demand from the world’s second largest economy any reduction in demand will often tend to weaken the Australian Dollar and this appears to be what is happening at the moment.
The impact of Brexit on the Pound to the Australian Dollar
Turning the focus back towards what is happening in the UK and it is Brexit that is dominating all the headlines at the moment. The Speaker of the House John Bercow recently announced that the Prime Minister will not be allowed to hold another ‘meaningful vote’ if the new deal is very similar to that already proposed which was voted against recently.
With just ten days to go before the UK is set to leave the European Union things are still uncertain as to what will happen next. The likelihood is that Brexit will be postponed but for how long is the most important question.
Theresa May is due to travel to Brussels to discuss the terms of any delay but all the 27 members of the European Union will have to agree to any proposed extension period so there is still a risk to the value of the Pound.
I personally think that a no deal Brexit will be avoided and an extension will be granted and once this happens depending on the length of the delay I think this could provide the Pound with some real support against the Australian Dollar.
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Tom Holian firstname.lastname@example.org