The AUD to GBP rate was trading lower on Christmas eve as traders anticipate an official announcement on a Brexit deal. After four and a half years of haggling, Britain is set to formally secure its exit from the European Union.
Sterling has been under pressure against the Aussie currency as the virus outbreak has been less sever in Australia and this has led to a quicker recovery in the economy. Adding to the pound’s woes was the latest set of Tier 4 restrictions being applied to the U.K.
The AUD to GBP exchange rate was trading below the 0.5600 level as markets await a formal deal.
Brexit and Canadian Agreements on Trade Issues
Brexit talks finally appear to be coming to a close as Prime Minister Boris Johnson is said to be announcing a deal at 11:00. That would bring a long and winding road to a close in 2020 and the market could focus on other issues in the new year.
The deal was said to be agreed after overnight talks between the two negotiating parties and it’s likely that the U.K. has offered concessions on the country’s fishing waters. The final document would still need to be approved by the Prime Minister, the EU governments, and both parliaments.
Johnson and EU Commission President Ursula von der Leyen intervened in the negotiations, which seemed to have struck a bitter stalemate, but whether they had any effect is unknown. The UK will now formally leave the European Union and would avoid trade tariffs on January 1st if the terms are approved. There is maybe still one last chance for drama if an EU country or Parliament were to veto the deal, but it’s unlikely that one party would want to be held accountable for that eventuality.
As Brexit reaches a conclusion, the emergence of a new coronavirus strain has forced more English counties into lockdown.
Britain Extends Lockdowns as Australia Loosens for Christmas
Any GBP to AUD gains could be impacted by the latest virus lockdowns in the UK after PM Johnson announced a further move to Tier 4 in parts of the country.
Sussex, Oxfordshire, Suffolk, Norfolk, Cambridgeshire, Hampshire and Essex will now face the strictest restrictions from boxing day.
In contrast, Australia is seeing a loosening of restrictions for the festive period and this will play into the currency rate in the new year as the Australian economy should outperform Britain’s. This dynamic was seen last week with a loss of 140k jobs in the U.K., while Australia announced a gain of 90k. This is also having a big effect on UK spending as the Treasury dedicates 280 billion pounds to virus-hit sectors and companies. Despite this, there is pressure on the Chancellor Rishi Sunak to do more.
The first target for AUD to GBP is the 0.5500 level and lower levels could be seen today on the announcement of a deal.