GBP/AUD Exchange Rate Rallies from Two-Week Low, Is a Brexit Deal Possible this Week?

GBP/AUD Exchange Rate Buoyed by Brexit Hopes 

The Pound to Australian Dollar (GBP/AUD) exchange rate is firming in early trade this week on hopes that a UK-EU trade deal could be close. 

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8051, up roughly 0.2% from this morning’s opening rate. 

Pound (GBP) Firms on Cautious Brexit Optimism 

After plunging at the end of last week amidst growing fears of a no-deal Brexit, the Pound (GBP) has opened this week on firmer footing, in response to some cautious optimism. 

Trade talks between the UK and EU continued over the weekend, and while there has been no official word from either negotiation team, the UK’s foreign secretary Dominic Raab claimed on Sunday that the two sides are in the ‘last leg’ of talks. 

Raab suggested that talks were entering the ‘last major week’ and that an agreement remains a real possibility. 

However, the foreign secretary also said such a deal would rely upon the EU showing ‘pragmatism’ and that there remain a ‘fairly narrow’ set of hurdles which will need to be cleared first. 

While, Raab’s upbeat assessment was welcomed by markets, GBP investors are all too aware that these ‘fairly narrow’ set of issues are the same issues that have plagued talks for months, with the UK and EU unable to see eye to eye regarding fishing rights and state aid. 

With less than five weeks to go before the Brexit transition period is set to end, any upside potential in the Pound is likely to remain limited until a deal is struck. 

Australian Dollar (AUD) Undermined as Australia-China Tensions Flare 

At the same time the Australian Dollar (AUD) is struggling this morning amidst an escalation of political tensions between Australian and China. 

The latest flare-up comes after a Chinese government twitter account tweeted a fake image in reference to recent war crime allegations against Australian soldiers in Afghanistan.  

Australian Prime Minister Scott Morrison has demanded that China apologise for sharing the ‘repugnant’ image, something which China’s foreign minister has rejected. 

Tensions between Canberra and Beijing has risen sharply over the past year after the Australian government called for an international investigation into the outbreak of the coronavirus in China. 

In response China has leveled tariffs against a number of Australian exports and even blocked the import of certain products such as coal.  

China is Australia’s largest trading partner and AUD investors fear further escalation of tensions between the two nations could cause considerable damage to Australia’s export driven economy.