The Australian dollar to pound interbank exchange rate stands at 0.5494 today, its strongest in 10 days, or since Tuesday 17th September.
By comparison, the so-called Aussie dollar was as weak as 0.5412 versus sterling last Friday 20th September, so it’s since strengthened by +1.51%.
This could benefit you, because when you transfer money to the UK from Australia, you might get a higher pound total, compared to if you’d exchanged currencies in the last 10 days.
To stay up-to-date with the Australian dollar to pound interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, select ‘AUD’ (Australian Dollar) to ‘GBP’ (Great British Pound).
Also, to check what’s influencing the value of the Aussie versus sterling recently, visit our AUD to GBP Exchange Rate Updates page. Here, select the most recent article to read the latest news.
One reason why the Australian dollar has risen versus the pound is because the UK’s Brexit progress has seemingly stalled after last week’s gains, with Parliament and the government in conflict.
Another factor why the AUD has reached this 10-day versus the GBP is because European Commission President Jean-Claude Juncker has warned that a ‘No Deal’ Brexit would be the UK’s fault.
However, looking to next week, the Australian dollar to pound interbank exchange rate could be affected, because the Reserve Bank of Australia (RBA) is being tipped to cut interest rates again.
Australian Dollar to Pound Strengthens, as Brexit Progress Stalls
As I mention, one reason why the Australian dollar to pound interbank exchange rate has reached this 10-day high today is because it looks like the UK’s Brexit progress has stalled this week.
This follows Parliament’s return to session, after the UK Supreme Court ruled this Tuesday 24th September that Prime Minister (PM) Boris Johnson’s decision to prorogue, or suspend, Parliament is illegal.
In particular, the relationship between Parliament and the government currently seems unusually antagonistic. For example, the Speaker of the House of Commons, John Bercow, has described the atmosphere as “toxic”, reports The Guardian.
In addition, yesterday MPs refused to allow Parliament to go into recess, so that the ruling Conservative Party could hold its annual conference, as is convention.
It’s thought that opposition MPs’ feel badly toward PM Johnson’s government, first because the Supreme Court ruled on Tuesday that Mr. Johnson’s decision to prorogue Parliament is against the law.
So this suggests that the PM abused his power, to prevent MPs from scrutinising his Brexit plans, rather than for Mr. Johnson to plan his government’s domestic legislative agenda, as he argued.
Second, since Parliament returned to session this Wednesday 25th September, Mr. Johnson has refused to explain his Brexit strategy.
For example, when Labour MP Ian Murray asked Mr. Johnson, "If he doesn't get a deal through this House, or a 'no deal' through this House, by 19 October, will he seek an extension from the EU to 31 January?" Mr. Johnson simply replied “No”.
This exchange refers to the recently passed Benn Act, opposition MPs’ law that obligates Mr. Johnson to request a second extension to Article 50, the UK’s negotiating timetable, if there’s no deal in place by October 19th.
By saying “No”, Mr. Johnson implies that he won’t comply with the law, yet he’s also stated that he won’t break the law. So this suggests that he may be seeking a legal loophole.
To sum up, it looks like opposition MPs increasingly distrust Mr. Johnson. Yet on the other hand, they’re unwilling to call a general election, to try and remove the PM from office, until a ‘No Deal’ Brexit is firmly off the table.
As a result, the PM is refusing to confirm that he’ll extend the Brexit deadline, as he’s obliged to do, yet MPs won’t allow Mr. Johnson any other room to manoeuvre.
In the meantime, the UK’s Brexit timetable is ticking down. The UK’s default legal position remains that we’ll leave with ‘No Deal’ if there’s no agreement in place by October 31st.
However, the Benn Act seemingly guarantees that the UK will request a Brexit extension, most likely up to January 31st, if Mr. Johnson doesn’t break the law. Meanwhile, there’s a stalemate, weakening sterling.
AUD to GBP Gains, as EU Awaits UK Clarity Over Brexit
In addition, another factor why the Australian dollar to pound interbank exchange rate has reached this 10-day high is because, with Parliament and the UK government seemingly at loggerheads over Brexit, the EU meanwhile is waiting for clarity, to continue to negotiate.
In the meantime, the EU may be less willing to compromise with the UK, cutting the odds that there’ll ultimately be a deal.
For example, an EU diplomat has told the BBC’s Europe Editor Katya Adler that the chances that there’ll be a Brexit deal before the EU’s next summit on 17th October are “pretty much nil”.
Both PM Johnson, and the financial markets, were hoping that the UK and the EU could amend the current draft Withdrawal Agreement before this date, to avoid having to extend Brexit even further.
Also, the EU diplomat told Ms. Adler that: "Even if we manage to reach an agreement with [Boris] Johnson - which is an outside chance anyway, do we really think that the angry, divided House of Commons will approve a Johnson-brokered Brexit deal?"
So the EU recognises that Mr. Johnson’s antagonistic relationship with Parliament makes it less likely that MPs will approve a new deal.
With this in mind, the EU may be less willing to negotiate with Mr. Johnson, if they feel that whatever amended deal they broker will be rejected by MPs.
In addition, some EU figures continue to doubt that the PM is negotiating sincerely. This is because Mr. Johnson may wish to retain his “hard Brexiteer” credentials, ahead of any UK general election that could be announced in the near future.
Meanwhile, European Commission (EC) President Jean-Claude Juncker has warned that, if the UK and the EU don’t agree a Brexit deal, it would be the UK’s fault.
Speaking to Germany’s Augsburger Allgemeine newspaper today, Mr. Juncker said that he’s trying to reach an agreement, “But if we don’t succeed in the end, the responsibility would lie exclusively on the British side,” reports RTE.ie.
Also, Mr. Juncker added that “We will want to and need to seal a free trade agreement. But that won’t happen just like that, as some in Britain imagine. Some of the trade deals we sealed in my term of office took many years to reach.”
So the EC President is trying to inject a dose of reality into the UK’s Brexit discussions, as free trade deals are lengthy, intricate agreements to reach. This has weighed down sterling too.
Aussie Dollar Versus Sterling Could Be Affected, as RBA May Cut Next Week
Looking to next week, the Australian dollar to pound interbank exchange rate could be affected, when the Reserve Bank of Australia (RBA) releases its interest rates decision, next Tuesday 1st October.
It’s thought that Australia’s central bank could cut borrowing costs further below their current 1.0%, to a new all-time low, having already cut Australia’s interest rates twice in 2019.
To be specific, the Reserve Bank may cut Australia’s interest rates to 0.75% next Tuesday, to further support Australia’s decelerating economy, reports News.com.au.
For example, so far this year, Australia’s unemployment rate has risen by +0.4%, to 5.3%, while Australia’s inflation remains well below the RBA’s target range of 2%-3%. This suggests that Australia’s economy needs easier monetary policy.
The Australian dollar historically weakens when the RBA cuts interest rates, first, because lower borrowing costs suggest that Australia’s economy requires greater monetary support to expand.
Second, lower interest rates make investing in Australian dollar-denominated assets less profitable for the world’s money managers, in turn cutting demand for Australia’s currency, and its value.
For example, Sean Callow, a strategist at Westpac, said ahead of the RBA’s decision next week that "We are comfortable with our long-held call for the RBA to cut the cash rate to 0.75% on Tuesday. A rate cut is about 75% priced, so A$ seems vulnerable to further decline."
In addition, George Tharenou, an economist at UBS, said that "This data is very challenging for policy makers.”
In fact, according to some economists, the RBA could cut interest rates even further in 2019/20, down to just 0.25% by May next year.
This is because the world’s economy is forecast to grow at the slowest pace in over a decade this year, according to the OECD’s (Organisation for Economic Co-operation and Development) most recent predictions. So the RBA may have to cut borrowing costs, to protect Australia’s economy.
However, it’s worth noting that RBA Chairman Philip Lowe has a more upbeat perspective on Australia’s economic outlook. Speaking at the Armidale Business Chamber earlier this week, Dr. Lowe said that “a gentle turning point has been reached” in Australia’s economy, according to the RBA website.
With this in mind, there’s an outside chance that the RBA won’t cut next week. This is worth looking out for, and may influence the Australian dollar.
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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or Contact Us.