With the EU referendum campaigns starting in earnest and Australia’s Prime Minister causing controversy, the GBP/AUD exchange rate has experienced notable fluctuations over the past seven days.
Last week saw Sterling peak at 1.8813 before falling to 1.8320 before the weekend. Recent developments have since seen the Pound recover to the 1.86 level.
Dovish Treasury Report Ramped up the Stakes for the UK Referendum
The week’s UK Referendum news started with a report published by the Treasury. The document detailed how the UK would be economically worse off if it left the EU.
The news initially sent Sterling tumbling as it increased uncertainty over what would happen to the country after the June 23rd vote.
The announcement triggered an immediate drop off in GBP/AUD, although the Pound went on to recoup losses amid bets the report might garner support for the ‘remain’ camp.
Sterling Strengthens, GBP/AUD Advances
With ‘leave’ Co-Chair Michael Gove’s retort to the ‘remain’ report failing to unsettle investors, the Pound was able to extend gains against the Australian Dollar on Tuesday.
In addition to calling the Treasury report another ‘bogeyman’ to frighten undecided voters, Gove has also likened remaining in the EU to being a voluntary hostage in the back of a car.
The most damaging comment from the ‘leave’ group, however, was that it would not be publishing a pro-‘Brexit’ document in response to the Treasury’s contribution for fear of making inaccurate predictions.
Australian Dollar Unsettled on Election Prospects
The Australian Dollar has been unstable this week as events in the Australian parliament dampened the appeal of the ‘Aussie’.
Yesterday, the Australian Senate rejected PM Malcolm Turnbull’s ABCC bill for a second time, which led to speculation that Turnbull would be calling a general election on July 2nd to ‘restack’ the Senate deck, so to speak.
This has been informally confirmed by the PM today, although a formal declaration is not expected until after the May 3rd Budget Announcement.
GBP/AUD Forecast
For the rest of the week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of tomorrow’s Australian leading index figure and UK employment data.
A speech from Bank of England (BoE) official Ian McCafferty could also prompt GBP/AUD movement, as could Thursday’s UK borrowing stats and retail sales figures.
Heads Up
Summary of major upcoming data releases that we think may move the market.