The British pound is higher against the Australian dollar on Tuesday as markets globally react to the decision by the US Treasury to stop labelling China a currency manipulator. The decision came just before the much-anticipated signing of the US-China trade deal on Wednesday. The pound was helped by the decision by British Prime Minister Boris Johnson not to accept an official request for a second Scottish referendum.
GBP/AUD was higher by 18 pips (-0.09%) to 1.8823 as of 2pm GMT, however the modest gains leave the currency pair close to its 2020 lows.
After falling for the past week, Sterling was seeing a modest rebound on Tuesday after the announcement by British PM Boris Johnson that he will not allow a second Scottish referendum or indyref2 as it is known for short. The request was from Scottish National Party leader Nicola Sturgeon in the wake of her party’s election victory in Scotland.
The request to devolve more powers to Scotland in order to allow the referendum is officially known as a ‘Section 30 Order’. Ms Sturgeon had sent the order to the Prime Minister on the basis that Brexit has materially changed the nature of the union since the last vote took place. The whole of the UK voted to leave the European Union but voters in Scotland voted to remain. Johnson vetoed this idea, saying that she and her predecessor had promised the first vote in 2014 was “once in a generation”.
The referendum is another potential source of political uncertainty for the United Kingdom. The reaction in currency markets was weak since it was already well known that Boris Johnson is not in favour of a second referendum on Scottish independence and was very likely to decline a request for one as Prime Minister.
The British currency has had a torrid few days under a barrage of commentary from central bankers talking up the prospects of a cut in UK interest rates. So much so that financial markets now show some traders expect a rate cut as soon as the next Bank of England meeting this month.
There was little news out of Australia to move its currency, although cooler temperatures offer some hope an end to the weeks-old bushfires is in sight.