GBP/AUD is declining in early trading on Tuesday on renewed political tensions in the UK. The pair is currently trading at 1.9320 as of 6:00 AM UTC.
The sterling turned bearish after the UK released PMI data. However, the British currency is now under pressure after the UK government, led by Prime Minister Boris Johnson, said it was about to add a new clause to the Withdrawal Agreement Bill (WAB) to make it illegal for Parliament to extend the deadline of the transition period. According to some politicians and analysts, this opens the door to a no-deal Brexit, which scares markets.
Brexit is likely to happen before January 31 of next year, but the transition period is due to complete on December 31, 2020. Nevertheless, the UK can agree with European leaders to extend the deadline, but Johnson insists for an 11-month transition. He will put the amended WAB to vote this week to make any extension illegal.
Many senior European figures, such as the EU chief negotiator Michel Barnier, are not sure that a deal might be agreed by the end of next year.
The Aussie would have gained more against the pound, but the Reserve Bank of Australia (RBA) was dovish at the end of the year. In its latest meeting minutes, the central bank said that it was open to more rate cuts, though it would reassess the economic outlook at its first meeting in 2020. Currently, the RBA monitors the effect of the latest three rate cuts. The bank said:
“The available evidence suggested that more stimulatory monetary policy had been working through the usual channels. Economic growth and the unemployment rate remained broadly consistent with the forecasts, but members agreed that it would be concerning if there were a deterioration in the outlook.”
The RBA hinted to more rate cuts to support hiring and investments. The central bank is seeking to revive an economy that started to slow last year.
