GBP/AUD is advancing on Monday, though it has lost most of the morning gains. Currently, the pair is trading at 1.8732, up 0.05% as of 8:08 AM UTC. The price touched the daily peak at 1.8783. Even though the pound had several bullish days last week, it couldn’t recover the losses of last Monday, when it fell against the Aussie by 0.87%.
Pressure on the sterling had eased since Christmas Day when investors shifted focus from no-deal Brexit fears. Right after UK Prime Minister Boris Johnson secured a major victory in the national election, he announced that he would make it illegal for the government to seek an extension for the Brexit transition deadline beyond December 2020. The UK is about to leave the European bloc on January 31, 2020, and investors are worried that 11 months won’t be enough for the two sides to reach a trade deal. Nevertheless, Johnson insists on his tight timeline, which opens the door to a potential no-deal Brexit — a worst-case scenario for the British economy.
Johnson’s intention has already become law after the parliament passed the second reading of the Withdrawal Agreement Bill (WAB) on Friday, December 20.
Despite everything, some economists hope that the PM will change mind and will give up his opposing to an extended timeline.
European trade commissioner Phil Hogan said that he expected Johnson to abandon his pledge not to extend the Brexit implementation date. He said in an interview with The Irish Times:
“In the past, we saw the way the prime minister promised to die in the ditch rather than extend the deadline for Brexit, only for him to do just that. I don’t believe prime minister Johnson will die in the ditch over the timeline for the future relationship either.”
Hogan said the UK’s decision to rule out any extension attempt was “very odd,” calling it a political “stunt.”
The pound would have performed better against the Aussie, but the Australian currency is supported by optimism over the trade deal between the US and China. The latter is Australia’s largest trade partner.
