Building pressure on Prime Minister Theresa May to sack two pro-Brexit members of her Cabinet is weighing on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate today.
The GBP/AUD currency pair has fallen half a cent to an interbank rate of 1.7127.
Pound Sterling (GBP) Weakens as Markets Fear Cabinet Reshuffle Following Patel and Johnson Scandals
Pound (GBP) exchange rates have broadly softened today as the futures of Foreign Secretary Boris Johnson and Secretary of State for International Development Priti Patel look uncertain after Conservative MPs demanded that the Prime Minister fire both.
Johnson provoked fury from all sides after his ill-advised comments on the case of Nazanin Zaghari-Ratcliffe – a British woman jailed on spy charges in Iran – which could see her sentence doubled.
Zaghari-Ratcliffe, currently serving five years in prison after being accused of spreading propaganda, maintained during her defence in court that she had never worked in Iran and was in the country for a family holiday.
This defence was left in tatters in the eyes of the Iranian court after Johnson commented in Parliament that the charity worker had been ‘teaching people journalism.’
Meanwhile, it emerged last week that Patel had held a string of undeclared meetings with Israeli officials – including Benjamin Netanyahu, the Prime Minister – whilst on holiday, completely outside of the knowledge of Downing Street.
Speaking of an engagement on September 7th with Israeli Security Minister Gilad Erdan, ITV Political Editor Robert Peston wrote on Facebook; ‘What is most shocking about this meeting is that it had been declined on her behalf by her department officials. But unbeknownst to them, it was then fixed up by her constituency office.’
‘None of her officials attended it. The meeting was not minuted or recorded. The only other Briton present was the businessman and honorary presidential of Conservative Friends of Israel, Lord Polak.’
GBP Exchange Rates Slump on Prospect of More Cabinet Departures Following Fallon Resignation
Just last week the unfolding sexual harassment scandal now enveloping Westminster forced Defence Secretary Michael Fallon to resign after accusations of inappropriate conduct were levelled at him.
Since the Brexit referendum the Cabinet has struggled to present a unified front or a coherent approach to the UK’s split from the European Union.
The prospect of another reshuffle has therefore hiked uncertainty even further; especially given that the three members either departed or likely to depart are all staunch Brexiters, which could upset the balance of power in government, lead to even more bickering between pro and anti-Brexit factions and weigh on Pound Sterling (GBP) exchange rates.
Australian Dollar (AUD) Exchange Rates Inch Higher despite Disappointing Chinese Trade Data
Markets have turned to risk assets today, with weakness in the Pound, Euro and US Dollar making safer bets less appealing.
This has allowed the Australian Dollar to Pound exchange rate to scrape some gains this morning, despite poor trade data from China; Australia’s largest export market.
In Yuan terms, import growth slowed from 18.7% to 17.2%.
Capital Economics China Economist Julian Evans-Pritchard explained; ‘The big picture is that both outbound and inbound shipments have softened recently, a trend that continued last month.’
‘We suspect that this reflects a slight easing of growth in other emerging markets along with weaker domestic demand as a result of slower infrastructure spending.’
Particularly worrying for the Australian economy was a drop in iron ore imports to a two-and-a-half-year low.
Will Chinese Inflation Data Help or Hinder GBP AUD Exchange Rate Forecast on Quiet Data Day?
With the only UK data set for release in the near-term being tomorrow’s midnight publication of the RICS house price balance, Pound to Australian Dollar (GBP/AUD) exchange rate movement is likely to be dictated by outside sources.
Australian home loans data could also be of little impact given that Chinese inflation data will follow shortly after its release.
Strengthening inflation in the Asian superpower points to strong consumer activity, which would suggest improved export demand for Australian firms.
Weakening price growth indicates the opposite, which would soften the Australian Dollar and boost GBP/AUD.