GBP/AUD: Sterling Drops on Hard Brexit Fears

GBP/AUD is tumbling in early trading on Monday, after an impressive three-day rally that sent the pair to the highest level since May 2016. Currently, one British pound buys 1.9603 Australian dollars, down 0.63% as of 6:37 AM UTC.

The pound is declining on fears of a hard Brexit, as investors found out that UK Prime Minister Boris Johnson would say that the country doesn’t need to abide by the bloc’s rules. Elsewhere, the Aussie is taking a rest from worries about the coronavirus outbreak in China. Also, the Australian currency is supported by a series of positive economic updates.

Earlier today, Australia and New Zealand Banking Group (ANZ) said that total job ads rose 3.8% this month, from a 5.7% decline in December. Nevertheless, the prolonged bushfire season and the spreading coronavirus might negatively impact labour demand in the months to come.

Australia’s housing market has also started the year on the right foot, with annual price growth accelerating at the fastest pace in over two years.

Property data analyst CoreLogic said that home prices in Australia rose 0.9% this month, after a 1.1% increase in December. Thus, the growth in the 12 months to January accelerated to 4.1%. Sydney and Melbourne led the gains.

Ryan Felsman, a senior economist at CommSec, commented:

“The lift in home prices has the potential to boost perceived wealth and thus boost consumer spending. Wealth is at record highs and incomes are still running faster than consumer prices. The missing ingredient is confidence.”

In the UK, markets are discussing the possibility of a hard Brexit after investors discovered that Johnson wouldn’t mind such a scenario.

Johnson will hold a speech later today during which he will say that the UK prefers a Canada-style trade agreement.

“We have made our choice – we want a free trade agreement, similar to Canada’s but in the very unlikely event that we do not succeed, then our trade will have to be based on our existing Withdrawal Agreement with the EU,” the PM will state.

The UK officially left the European Union last Friday, but the two sides have to reach a trade agreement until the end of December 2020.

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