With the Article 50 trigger now imminent, the Pound has fallen slightly against the Australian Dollar due to trader uncertainties.
After this momentous event occurs and the Pound presumably plummets, the UK currency could be further weakened by preliminary talks with EU leaders. At the same time, however, the GBP AUD exchange rate may conversely appreciate if it looks like negotiations will be favourable for the UK.
One factor affecting the nature of these talks could be the status of the Article 50 trigger itself; if the House of Commons approves a Lords-backed amendment to secure the rights of EU citizens after Brexit, then discussions may be more positive for the UK due to amendable EU officials.
On this note, EU Parliament negotiator for Brexit, Guy Verhofstadt, has spoken supportively;
‘All British citizens today have also EU citizenship. That means a number of things: the possibility to participate in the European elections [and] the freedom of travel without problem inside the Union. We need to have an arrangement in which this can continue for those citizens who on an individual basis are requesting it’.
Verhofstadt has not been one-sided in his forecasts for Brexit talks, however, warning that the EU Parliament reserves the right to veto any deal established between the UK and the EU.
Throwing the nature of talks into further uncertainty has been UK Foreign Secretary Boris Johnson, who has stated of continuing to pay the EU after leaving;
‘It is not reasonable, I don’t think for the UK having left the EU, to continue to make vast budget payments, I think everybody understands that and that’s the reality’.
Adding to concerns over the matter of UK-EU payments has been BBC Political Editor Laura Kuenssberg;
‘The money is likely to come up very early and it is likely to become very messy and very, very nasty. On the EU side there is a very strong view that [it] has to be sorted out early doors’.
All this adds up to what may be years of high Pound volatility as Brexit negotiations continue; broadly speaking, signs that the UK will get a good deal out of the talks are likely to improve the GBP AUD exchange rate. Conversely, if it looks like relations are breaking down between the UK and the continent then Sterling could fall into a heavy and protracted slump.
The future performance of the Australian Dollar may be tied to trading relations between the US and China; if the feared trade war breaks out between the two global superpowers then Australia may be caught in the crossfire.
This could lead to a reduced level of Australian-Chinese trade, which would hit the Australian economy at a time of uncertainty and likely cause a steady AUD depreciation against the Pound.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was trading at 1.61 and the Australian Dollar Pound (AUD GBP) exchange rate was trading at 0.61.
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