The AUD GBP exchange rate is looking to add to recent gains with a move above 0.5500. The Bank of England’s decision to not hike rates has hurt the pound and the Article 16 Brexit tensions could also lead to further problems for the pound. The Irish foreign Minister has suggested that the UK will trigger article 16 after the COP26 summit, which could have repercussions for the Brexit deal.
The AUD GBP exchange rate was trading at 0.5480 as the week got underway.
Brexit deal fears add to central bank unwind
Fears over the Brexit deal have resurfaced and that could weigh on the pound sterling, which is seeing an unwind of aggressive Bank of England rate bets.
The Irish foreign minister Simon Coveney said that the UK government is “laying the foundation” to trigger article 16 which he said would be in “bad faith”. The protocol was part of the Brexit deal negotiations and agreed to prevent a hard border with Ireland.
Coveney told media that the “messages” that were coming from political parties in Northern Ireland, the European Commission and others were concluding that London was preparing to trigger Article 16 after the climate summit ends.
Coveney told Irish television that such a move would be a “significant act that would damage the relationship between Britain and Ireland”.
“I think all the evidence now suggests that the British government are laying the foundations to trigger Article 16. That is a worry – I think we need not to be naive in terms of what’s happening.”
The EU could hit back and say that the overall Brexit trade deal only happened because of the protocol. Therefore, if the UK uses the Article 16 clause the EU may collapse the trade deal and the pound sterling could see dramatic Brexit price swings.
Traders look to consumer confidence and GDP figures
Traders will look to consumer confidence figures on Tuesday for Australia with markets looking for an improvement on last month’s 104.6 reading. The index saw a high of 118.8 in April ahead of the recent lockdowns.
The Victorian government and City of Melbourne has also announced a number of initiatives to inject life back into the city centre back to life, including a A$5m midweek dining rebate scheme.
Victorians dining in Melbourne will be able to claim up to 30% of their bills for meals between Monday and Thursday every week. The $44m package has been unveiled to bring life back to the city after a sixth lockdown for the city.
Thursday will see a GDP update from the UK this week, but the Bank of England lowered their expectations for the economy at last week’s interest rate meeting. The forecast for the three months to September will have to show an improvement on the previous 2.9% reading to impress traders. The country has been dealing with energy market issues since then, while labour market shortages and supply chain issues have also been a weight.
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