• Pound (GBP) as a messy end to Brexit looks most likely
  • UK GDP +6.6% in July vs 6.7% forecast
  • Australian Dollar (AUD) boosted as US tech selloff fears ease
  • Gains could be capped after Trump revokes 1000 Chinese student visas

The Pound Australian Dollar (GBP/AUD) exchange rate is once again out of favour. The pair is extending decline for a sixth straight session. At 08:30 UTC, GBP/AUD trades -0.5% at 1.7534. The Pound is on track to lose 3.3% versus its Aussie counterpart in its worst weekly performance in 5 months.

Brexit chaos and a slowing economic recovery are dragging on demand for the Pound. Brexit talks are on the brink of collapse, in what is shaping up to be a messy end to four years of Brexit talks. The British government is defiantly refusing to scrap plans to override parts the Brexit divorce treaty, much to the fury of the EU. If the UK remains defiant, trade talks will end.  It Is difficult to see how the Brexit mess can end well. As the two sides play brinkmanship the chances of a no trade deal Brexit have shot through the roof.

At the same time the Pound is digesting data which shows that he UK economic recovery is starting to stall. The monthly GDP reading showed 6.6% growth in July, missing forecasts of 6.7%. The UK economy is still 11.7% smaller than prior to coronavirus.

The Australian Dollar is pushing higher amid a broad risk on mood in the markets. After the US tech sector sold off again in the US session on Thursday, investors were anxious that the move was part of something more sinister rather than a risk reset. However, US futures are once again pointing to a higher open for the end of the week.

The Australian Dollar is considered to be risk sensitive, therefore a risk on mood in the broader financial markets often also boosts the Aussie.

Gains in the Aussie could be capped if tensions between the US and China continue to rise. Trump announced that the visas for 1000 Chinese students have been revoked as they are deemed high risk.