The Pound has shed gains to the slightly stronger Australian Dollar today, declining in value because of concerns about future Brexit negotiations.
On the other side of the currency pairing, the Australian Dollar has advanced because of growing optimism about future Reserve Bank of Australia (RBA) decisions.
Can Pound to Australian Dollar Rate Rise on Brexit Trade Talks?
While the Pound has fallen because of recent Brexit news, GBP could still trade higher if UK negotiators make significant progress in the coming weeks.
The latest setback has come from EU Chief Brexit Negotiator Michel Barnier, who has rejected claims that the UK could have a ‘special arrangement’ for the City of London.
Making his point clear, Mr Barnier said;
‘There is no place [for financial services]. There is not a single trade agreement that is open to financial services. It doesn’t exist.
[There are] red lines that the British have chosen themselves. In leaving the single market, they lose the financial services passport’.
On a similarly worrying note, Barnier has stated that while the UK could make trading arrangements outside of the EU, these would still not be official until after Brexit.
These supposed restrictions have weighed on Pound trader confidence, as the UK is seemingly being laden with restrictions immediately after reaching fresh discussions.
In the event that UK negotiators manage to gain concessions or leniency from the EU side, the Pound could rise sharply against the Australian Dollar.
Primarily, such concessions would relate to the UK being able to effectively implement trade agreements as soon as possible.
Another bonus would be the ability to adapt as much as possible to life outside the EU during the transitional period, in order to minimise economic disruption.
Australian Dollar to Pound Rate Firms as RBA Confidence Grows
The Australian Dollar has firmed against the Pound today, following the release of December’s Reserve Bank of Australia (RBA) minutes.
The RBA left interest rates at 1.50% in early December, but the minutes point to increasing optimism about conditions in 2018.
The minutes show that policymakers predict ‘somewhat above average’ employment growth in 2018, with the bank minutes saying;
‘Over the prior year or so, the unemployment rate had fallen and inflation had moved closer to target.
Members noted that this had occurred at the same time as risks in household balance sheets had lessened.
Recent data had increased confidence that there would be further progress on these fronts over the following year’.
If this confidence grows significantly in the New Year, the Australian Dollar could appreciate significantly on higher odds of one or more interest rate hikes in 2018.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.7432 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5735.
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