GBP/AUD Exchange Rate Sinks as Sterling Traders Unconvinced by May’s ‘Bold’ Brexit Deal
UPDATE: The Pound Australian Dollar (GBP/AUD) exchange rate remained subdued today as Theresa May’s announcement of a ‘bold’ new Brexit deal has failed to convince Sterling traders, and with the European Elections coming up, no-deal fears are haunting UK markets.
The Australian Dollar, meanwhile, has been propped up rallying ‘Aussie’ traders who are relieved by ruling coalitions’ victory after Saturday’s election.
US-China trade tensions remain in many AUD trader’s sights, however, with US warships sailing into the hotly disputed South China Sea adding further to controversies between the two superpowers.
With Australia’s economy particularly reliant on US-China relations, ongoing tensions are likely to prove a drag on the AUD/GBP exchange rate in the week ahead.
GBP/AUD Exchange Rate Falls as Australian Coalition Party Secures Position against Odds
The Pound Australian Dollar (GBP/AUD) exchange rate has fallen by 0.6% today and is currently trading around AU$1.8396.
The Australian Dollar (AUD) rose against the Pound (GBP) following the weekend’s shock election outcome, which saw Australia’s Liberal-National Coalition retain their position, despite polling predictions.
David de Garis, an Economist at the National Australia Bank, commented:
‘The AUD popped initially higher after the Coalition pulled off a remarkable victory, defying … betting markets. It’s very likely that the Coalition will either have an outright majority or in minority Government.’
However, with the headwinds of the US-China trade war, these gains for the Australian Dollar are unlikely to last, with many ‘Aussie’ traders remaining cautious as the two economic superpowers drift further apart.
Joseph Capurso, a Senior Currency Strategist at the Commonwealth Bank, was bearish on AUD, saying:
‘There are two reasons why the AUD could fall this week — [US Dollar] appreciation because of global trade concerns, and the risk RBA Governor Phil Lowe outlines the case for a rate cut in a speech on Tuesday.’
GBP/AUD Exchange Rate Drops despite Theresa May’s Promise of ‘New and Improved’ Brexit
The Pound (GBP) has failed to gain against the ‘Aussie’ despite Prime Minister Theresa May saying she has a “new and improved” Brexit deal up her sleeve, although this has failed to convince investors.
Nigel Evans, the Executive Secretary of the 1922 Committee, was suspicious of May’s new deal, comparing it to the Titanic:
‘You can watch the movie Titanic a hundred times, but I’m afraid the ship sinks every time. An increasing number of Conservative MPs – even those who voted for it a second or third time – are saying enough is enough.’
Meanwhile, today saw the publication of the UK Rightmove House Price Index figures for May, which eased to 0.9% against last month’s 1.1%.
Many Pound traders are remaining nervous ahead of the European Elections this week, with both major UK parties – Labour and the Conservatives – coming under increasing pressure from Nigel Farage’s Brexit Party.
GBP/AUD Forecast: Sterling Could Rise if MPs Support May’s New ‘Bold’ Deal
‘Aussie’ traders are looking ahead to the speech by Philip Lowe, the Governor of the Reserve Bank of Australia, tomorrow, with concerns haunting Australian markets that he could push for interest rate cuts.
Pound investors, meanwhile, will be paying close attention to the UK inflation report hearings tomorrow.
The GBP/AUD exchange rate will likely remain driven by political developments this week, with the US-China trade war remaining in particular focus for Australian Dollar traders – while any indications of May’s new ‘bold’ Brexit deal gaining traction amongst MPs could see Sterling claw back some of its recent losses.