AUD to GBP exchange rate was 0.20% higher on Wednesday despite Boris Johnson’s Brexit deal being passed by the U.K. Parliament and House of Lords in the same day.
The transition was set to end for the trading partners at 11 p.m. on Thursday but the agreement has passed with hours to spare as the U.K. completes a historic parting from the EU bloc. The U.K. will begin 2021 as a sovereign trading entity and the new year could see more trade agreements penned as negotiators are free from the EU talks.
AUDGBP was trading at 0.5650 on New Year Eve as the pair looks for a solid direction.
Markets Breathe a Sigh of Relief as Brexit Ends
Investors are breathing a sigh of relief as it finally looks like Brexit risk premiums will be removed from the market.
British companies had been paying premiums in the debt market at times to account for the risk of a No Deal outcome. Traders in the currency market also had to constantly monitor the market swings created by the headlines. The new year should see the aud to gbp outlook driven by economic factors as both nations seek to emerge from the coronavirus. Australia has the higher unemployment rate with 6.8% against the U.K.’s 4.9% but the countries are on a different trajectory with Aussie jobs rising, while the U.K. sees a slump.
These factors will start to play out more in the currency outlook for 2021 and the current lockdowns in the U.K. are another reason that the Aussie currency is seeing support against the pound.
Sterling Pressured as Lockdowns Persist
U.K. stocks were lower yesterday, while the pound was under continued pressure as England saw further lockdowns over the virus.
The U.K. Health Secretary Matt Hancock said that more areas of England would be placed under the strictest tier of lockdown due to their claim that a new, more infectious strain of the virus is spreading across the country. The virus is appearing in a growing list of European and world nations and that could remove selling pressure from sterling.
Yesterday also saw the U.K. become the first country in the world to approve the vaccine created by Oxford University and AstraZeneca, with hopes that quick action could slow the surge of infections.
One bright spot for the U.K. economy has been in housing and yesterday saw another rise in house prices to their largest annual gain in six years, according to mortgage lender Nationwide. Workers that have been forced to work from home have been looking to move to larger properties as their remote arrangements become more permanent. The U.K. treasury also supported the market with incentives after the economic damage of the lockdowns.
The economic calendar is light this week and the markets will be quiet on the final day of trading in 2020. When the new year begins, we could see a move by investment funds into the pound after the removal of Brexit risks.
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