GBP/EUR: Concerns Over Eurozone Economic Outlook Weigh On Euro

The British pound is lower against the Australian dollar on Monday.

  • EU warms UK of delayed banks market access
  • Brexit talks resume tomorrow
  • UK on road to trade deal with Japan
  • Asia-pacific markets lifted by PBOC liquidity injection

GBP/AUD was down by 63 pips (-0.35%) to 1.8178 as of 4pm GMT.

The currency pair sank from highs above 1.825 to below 1.815 before recovering some of the losses but remaining down on the day.

GBP: EU warns about UK bank market access

The British pound has been trending lower in the past few days ahead of the latest round of UK/EU trade talks, which begin tomorrow (Tuesday) with dinner and formal talks through Friday.

In the lead up to the next round of negotiations, the Financial Times reported that the EU has warned that banks in the UK might face longer wait for market access after Brexit. Although more EU banks come to the UK for UK market access than vice versa, this is one of the EU’s best cards in the talks because of the heavy dependency of the UK economy on the City of London.

Other trade news softened the blow slightly with regard to a deal being the works with Japan- the world’s third largest economy, which has been agreed on an in principal basis according to the Daily Telegraph citing Trade Secretary Liz Truss.

The only UK datapoint today was monthly home price data from Rightmove, which doesn’t tend to be a market mover. Nonetheless, there is some hope a booming housing market could help the economy recover from the heavy -20% drop in the second quarter.

AUD: Aussie higher after PBOC liquidity

The Aussie dollar held its ground on Monday despite mixed noise on the state of play for the phase one US China trade deal. China’s foreign ministry declined to comment on why the trade talks review was delayed. However US representatives including Trade Advisor Peter Navarro sounded more positive, saying China was meeting its obligations under the deal.

The People’s Bank of China injected some extra liquidity into the Chinese banking system on Monday via a 700 billion yuan ($100 billion) medium term lending facility at a rate of 2.95% with a one-year term.