AUDGBP Higher Despite Brexit Deal

AUD GBP Lower Again with UK Inflation Surge

The AUD to GBP exchange rate was trading higher for the week despite the UK securing an exit deal from the EU. The move higher is likely being driven by profit-taking on the pound after a larger rally failed to materialize. The deal also has to clear Parliament with a vote today but that is unlikely to provide any problems with Labour saying they will approve the deal.

The AUDGBP was trading at 0.5635 in early Tuesday trading. Recent highs in the pair were at 0.5725 in early-December.

Brexit Uncertainty Could Switch to Aussie Uncertainty

With Brexit nearly out of the way, the pendulum could swing in the Pound to Australian dollar. As Sterling sees the removal of trade uncertainty, it may be the Aussie that sees a similar fate in 2021.

The Australian economy has been hit by growing trade tensions with its key trading partner China. Research firm Capital Economics have suggested that growth may “never return” to pre-virus highs.
China accounted for almost 40% of goods and 18% of services exports in the period between 2019 and 2020. Over the last few months, Beijing has adding tariffs to an increasing list of Aussie products, such as wine and beef. If the situation continues then the country will continue to see a hit to its economic growth.

Tensions have risen between the two countries since Australia supported a call for an international inquiry into China’s handling of the coronavirus.

UK MPs Set to Vote on Brexit Deal

UK MPs will vote today on the Brexit agreement secured last week between the country and the European Union. Much of this vote will happen remotely due to the current lockdown system in the country.
The hopes for a smooth transition got another boost yesterday when the deal was approved by EU ambassadors for the 27 remaining countries of the bloc.

The leader of the Labour Party Sir Keir Starmer has said that he and his party will vote for the exit deal. A majority of Tory MPs are also expected to vote for the Prime Minister’s deal.

As the risk associated with Brexit disappears, the AUD to Pound forecast will also hinge on the outlook for the UK economy as the virus lockdowns continue into 2021. Vaccinations will roll out in the first quarter but it remains to be seen if this can have an impact on GDP until the second or third quarter. The government is currently looking at enlisting the military to perform mass testing in schools and colleges when the Spring term starts.

The AUDGBP will have an eye on the recent highs near 0.5720 but the final approval of the Brexit deal may see a relief rally in the pound, where the initial target would be 0.5500. There is nothing substantial in the economic calendar until New Year, so the virus and political issues will dominate.

If you have an upcoming currency transfer and would like to learn more about the factors impacting exchange rates, feel free to contact myself, Jonathan Watson, directly using the form below.