The Pound has not really moved much against the Australian Dollar in the last few days with the rate remaining between 1.627 and 1.620. This could bring some optimism for Australian Dollar buyers as there could be a chance that Sterling’s demise has come to an end, however it’s worth remembering that the rate hit 1.60 as recently as April.
Brexit certainty could result in Sterling strength
One of the main reasons that the Pound has struggled recently is the uncertainty surrounding the Brexit negotiations and the fact there doesn’t seem to be much progress. The EU negotiators are adamant that they’re not going to talk about trade until citizens’ rights, a settlement payment and the Irish border are shown to be resolved.
The UK Government released further white papers yesterday outlining the position they’re looking to take and how they envisage Brexit taking place. One of the main concerns was the availability of goods as the UK left the EU. During the transition period the Government want to make sure the UK doesn’t run out of products that are currently being imported. Essentially, it would appear that the more clarity the Government can offer to businesses the more strength Sterling will receive.
A tale of two interest rates
In my opinion we could start to see the GBP/AUD rate move back towards the 1.65 level, however this could be a relatively long term expectation. Brexit clarity and strong economic data are really all that the Pound has to work with at the moment, especially as the talk of an UK interest rate hike by the Bank of England seems to have completely disappeared. Furthermore, the previous flurry for the AUD came from the Reserve Bank of Australia talking about several rate hikes, but it would appear they might be several years away which may slow down some of the Aussie strength for the moment.