GBP/AUD: Pound Extends Decline on Hard Brexit Fears

GBP/AUD continues to slide on Wednesday on renewed fears of a no-deal Brexit. The pair is currently trading at 1.9118, down 0.18% as of 5:36 AM UTC. Thus, the price has lost all its gains secured when the election results started to come up late on Thursday.

UK Prime Minister Boris Johnson wants to use his control of parliament to rule out any extension of the Brexit transition period. Currently, the deadline is set for December 2020. The markets fear that the amended Withdrawal Agreement Bill (WAB) leaves room for a no-deal Brexit.

The European officials expressed their concerns about the British PM’s move. The rigid deadline set by Johnson will limit the scope of a free trade deal between the UK and European Union, EU Commission Vice President Valdis Dombrovskis said yesterday. He stated during a news conference:

“We are raising a concern that the period for negotiating a trade agreement is going to be very limited and it would be very problematic to hold negotiations and reach agreement on a comprehensive trade agreement.”

The official added that the European side would have to focus on priorities in order to stay within the proposed deadline. He said that certain things would be out of reach.

A European diplomat said that the bloc was ready for any outcome. He told the press:

“The EU’s position hasn’t changed: we want to negotiate a good deal with our close British neighbours. But if the UK limits its options prematurely and sleepwalks into a no-deal at the end of 2020, the EU would be well-prepared, ready to mitigate the effects on its member states.”

The sterling has been under increased pressure after the Confederation of British Industry (CBI) published its factory output data yesterday. The indicator declined at the fastest pace in over a decade. In the three months to December, manufacturing output tumbled to -16 from -9 in November, which is the worst performance since 2009.

The survey was conducted before Johnson won a major victory in the UK election. It showed that export orders tumbled as well.

Markets are now waiting for UK inflation data due to be published today.

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