GBP/AUD is trading sideways, taking a pause from its steep decline. Currently, the pair is trading at 1.8700, up 0.01% as of 6:29 AM UTC. At the moment, the quotation seems to be undecided about where it will close the session. It touched a daily low at 1.8647 earlier today, which is the lowest level since November 11. It bounced back and is now trying to recover some of the Monday losses, when the price tumbled 0.87%, though it might revisit the daily low.
There are no major fundamentals to move the price right now, as the markets are closed on Christmas Day.
Nevertheless, the pricing revolves around two key factors that have been decisive for the pair in the last few days: the debate over the Brexit transition timeline and the US-China trade deal. Both factors are unfavorable for the sterling at the moment.
In the UK, Prime Minister Boris Johnson amended the Withdrawal Agreement Bill (WAB) to make it unlawful for the government to extend the transition deadline beyond December 2020. While Johnson has managed to keep his Brexit promises so far, investors fear that he might fail to reach a trade deal with the European Union within such a short period of only 11 months. A no-deal Brexit is the last thing economists are looking forward to. European leaders expressed the same feelings.
European Commission President Ursula von der Leyen warned that the UK would suffer the most if the two sides cannot meet the December 2020 deadline. She stressed that “the timetable ahead of us is extremely challenging.”
“That will clearly harm our interests but it will clearly impact more the UK,” the European official stated.
Elsewhere, the Aussie is also supported by easing tensions between the US and China. The world’s two biggest economies are about to sign the phase one trade deal, which has been already agreed between Washington and Beijing. Yesterday, US President Donald Trump said that he and Chinese President would have a signing ceremony. He told reporters:
“We will ultimately, yes, when we get together. And we’ll be having a quicker signing because we want to get it done. The deal is done, it’s just being translated right now.”