The Pound has been struggling against the Australian Dollar today, falling by -0.3% following last week’s UK general election-inspired losses.
Sterling Slumps on Conservative-DUP Concerns
GBP/AUD hit its worse levels since mid-April on Monday as the fallout from last week’s surprising UK election result continued.
As it stands, there is still no concrete government in place to manage upcoming Brexit negotiations.
The Conservative Party is still attempting to reach an agreement with the Democratic Unionist Party (DUP) to form a working government. This alliance is predicted to go ahead, but the two sides are currently at odds over matters like civil rights and the pensions ‘triple lock’.
Ahead of any official announcements, traders remain wary of potential delays or major compromises being made as part of the agreement.
Meanwhile, the latest Australian Dollar gains have been triggered by an uptick in demand for iron ore following a period of falling prices over recent weeks.
The latest AUD-boosting rise in iron ore has been attributed to an increased drive to build houses across China.
GBP/AUD Forecast
This week, Pound/Australian Dollar exchange rate movement is most likely to result from the dust settling after the election. Volatility in the pairing may occur as a result of UK inflation rate and jobs data, as well as the Bank of England’s (BoE) policy meeting.
UK inflation stats for May are out on Tuesday; forecasts have been for monthly inflation of 0.2% and no change in the annual figure.
These results may not have much impact (as the BoE is unlikely to make any adjustments to interest rates with the political climate so uncertain) but Wednesday’s average earnings figures may prove more influential.
If average earnings don’t approach the current level of inflation the Pound could come under further pressure as restrained consumer spending would have a negative impact on the UK’s economic outlook.
Also out on Wednesday will be UK unemployment and jobless claims figures. Forecasts are for a static unemployment rate and a slight increase in claimant counts.
Thursday’s BoE meeting may bring further GBP weakness if policymakers are pessimistic about the economy as Brexit talks begin.
Upcoming Australian data includes confidence and employment figures.
Australian unemployment is forecast to remain at 5.7%, coming alongside a predicted 10k rise in the number of employed persons. Surprisingly upbeat Australian jobs numbers could give the ‘Aussie’ a boost before the weekend.