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The Pound vs Australian dollar

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Despite the path for the UK’s divorce from the EU remaining unclear, the Pound has been increasing in value quite substantially over the past week or so, with the GBP to AUD exchange rate jumping by an impressive 7-cents in just the past two weeks.

The gains can be put down to both Sterling strength, as well as Aussie Dollar weakness. Sterling has climbed in value across the board of major currency pairs since the UK’s Prime Minister Theresa May lost the vote on her deal. Financial markets appear to have digested the recent impasse in negotiations as an opportunity to extend Article 50, and therefore allow the UK to continue trading with the EU under the current agreements. The potential of an extension to Article 50 has been a positive for Sterling, and we’ve seen the pattern of a softer Brexit outlook resulting in a stronger Pound on a number of occasions since the vote in 2016.

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The Pound to Australian Dollar (GBP/AUD) exchange rate dipped to AU$1.8325 on Monday afternoon ahead of crucial US-China trade talks taking place later in the week.

Meanwhile Sterling found itself on the back foot at the start of the session as markets braces for Tuesday’s parliamentary debate on Theresa May’s Brexit Plan B.

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Fresh Brexit Uncertainty Weighs Heavily on Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate

As Conservative MPs voted in favour of throwing out Theresa May’s withdrawal agreement in order to reopen discussions on the Irish backstop the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate tanked.

With the EU having already ruled out any renegotiation of the withdrawal agreement, unless the UK’s red lines change, this move left Pound Sterling (GBP) under pressure.

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The Pound to Australian Dollar (GBP/AUD) struck a low of AU$ 1.7973 on Tuesday morning after the UK’s Services PMI came in well below expectations.

Markit reported that the UK’s dominant service sector narrowly avoided stagnation last month, with activity falling to its lowest levels in over two years as Brexit uncertainty continues to drag on the UK economy.

UPDATE: The Pound Sterling (GBP) appreciated further against the Australian Dollar (AUD) following weaker-than-forecast Australian retail sales data, printing a month-on-month decline of 0.4% in contrast to a 0.0% forecast.

GBP gains were rapidly reversed however in the wake of the Reserve Bank of Australia’s (RBA) releases which while maintaining rates at record lows didn’t sound as dovish as investors expected.

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The Pound-to-Australian-Dollar exchange rates declined into Wednesday’s session and was last seen trading at AU$1.812 to the £1.

Interestingly, the sharpest drop for the Sterling-Aussie x-rate occurred in line with the Reserve Bank of New Zealand (RBNZ) releases which saw the Kiwi boosted sharply, suggestive of a by-proxy, positive, impact on the Aussie Dollar.

On the data front, UK headline and core CPI figures are due (0930 GMT) alongside the latest house price index (HPI) and producer price index (PPI) releases.

The Australian Dollar was also supported by rising optimism with regards to a US-China trade deal as top-tier US officials prepare for the next round of high-stakes trade talks in Beijing.

While initially firm on the March 1st ceasefire deadline, Tuesday saw President Trump soften his stance, suggesting an extension to the ceasefire could in the offing should a deal not be secured by the end of the month.

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The Pound Sterling (GBP/£) remained on a bullish footing against the Euro (EUR/€) in the wake of the early session UK retail sales figures release which saw consumer spending rebound and print an above-forecast month-on-month change of 1.0%.

At the time of writing, the Pound-to-Euro (GBPEUR) exchange rate was last seen at €1.1365, up 0.28% from the session open.

Despite the positive retail release, ING’s developed markets economist, James Smith maintains a sceptical outlook on any momentum building within the sector as Brexit uncertainty persists. Smith wrote “Despite an improvement in disposable incomes, the outlook for the high street remains clouded by the near-term uncertainty surrounding a ‘no deal’ Brexit.”

Smith added his expectation that consumer spending would likely be capped over the coming months with consumer confidence figures suggesting the outlook remains at its gloomiest perceived level since 2013.

“There is a risk that, as the Brexit deadline draws nearer, nervousness about the impact of ‘no deal’ will creep into the consumer mindset. At the very least, shoppers may opt against bigger ticket purchases in the short-term, instead choosing to maintain savings levels,“ Smith said.

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The Pound to Australian Dollar (GBP/AUD) exchange rate remained flat through the first half of Monday’s session, holding steady at around AU$1.8068 amid renewed US-China Trade optimism.

Hopes of a Breakthrough in talks appeared to be driven by a tweet from US President Donald Trump as he spoke of ‘Big progress’ following the latest round of talks.

While this helped to support the ‘Aussie’ it was ultimately offset by some mixed Chinese data, which left AUD to remain flat against Sterling.

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  • 2 weeks later...

 Boosted by an alleviation of Brexit no-deal fears, the Pound Sterling (GBP/£) remained stronger against a basket of peers into Wednesday’s session.

Against the Australian Dollar (AUD), the GBP gained 0.93% on Tuesday, extending that by another 0.37% during Wednesday trading so far to hit a joint four-month best of $1.85221.

The GBP was lifted following a parliamentary session in the UK in which the PM announced a series of votes which give MPs the opportunity to direct the course of Brexit with the PM’s deal; no-deal and a Brexit delay all available options.

Meanwhile the risk-sensitive Aussie was weighed amid India-Pakistan military aggression raising the prospect of regional tension.

Societe Generale director, Kyosuke Suzuki, wrote “So far market reaction in major currencies has been relatively limited as tensions between the two countries had already been high. Focus is on whether the conflict shows signs of escalating.”

Wednesday will see UK lawmakers convene to participate in indicative Brexit votes, however given the new timeline these are of limited importance - if the PM is to be trusted on her offer of binding votes commencing March 12th.

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