AUD News: Brexit causing pound uncertainty as AUD weakens against USD

Overnight a risk-averse mood prevailed, and markets saw the AUD as the third worst performing currency after the pound and NZD. The USD came in as the best performing, currently trading around 0.7084 against the Aussie dollar. 

 

The USD’s overnight strength comes off the back of perceived political risks in Europe including the Italian government's ongoing arguments with the European Commission over Italy’s expansionary budgets, which is putting downward pressure on the Euro against the USD. 

 

Flow on effects of the USD’s strength saw the AUD ease back below 0.71. 

 

 

The weakening of the AUD comes despite an increase in commodity prices and the Chinese government’s reassurance that they would support the equity market and private businesses.

 

On the other side of the globe, markets are witnessing downward pressure on the pound as a result of both domestic and international factors.

 

Faster than expected wage growth in the UK failed to cause long-lasting GBP gains. UK economic data also revealed a slump in retail sales and slower than expected inflation. The resulting reduced hopes for interest rate hikes are putting pressure on the pound.

 

This pressure is coupled with the growing concerns around Brexit. British PM Theresa May announced to Parliament a plan to restart talks with the EU, hoping to seek out the option to extend the Brexit transition beyond the original date of December 2020 if the EU and UK had not agreed on a final free-trade deal by then. 

 

The culmination of these factors saw the Pound fall to its lowest level in two weeks on Monday. 

 

Back on Aussie shores, the past weekend’s by-election in Wentworth is expected to see the Government lose its current one seat majority. Independent candidate, Kerryn Phelps, is currently in the lead against Liberal candidate, Dave Sharma, and it is unlikely that he will regain footing at this late stage of counting. 

 

Whilst domestic politics have had little effect on the AUD compared to wider international events, the looming period of inertia in Australian politics that comes as a result of this election is by no means positive for Australia or its dollar.  

 

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