GBP/AUD Exchange Rate Muted as Political Uncertainty on the Rise
UPDATE: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate traded in a narrow range through the second half of Thursday’s session, as the pairing struggled to find momentum amidst the return of political jitters in the UK.
This comes as some candidates to replace Theresa May as PM have floated the idea of closing parliament in order to force through a no-deal Brexit.
Unsurprisingly this unnerved some GBP investors ahead of the official start of the Conservative leadership race when May steps down tomorrow.
GBP/AUD Exchange Rate Dips on Solid Australian Trade Figures
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning, with the pairing relinquishing some of its recent gains after the release of Australia’s latest trade figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8175, which is down around half a cent from Wednesday’s best levels.
Australian Dollar (AUD) Buoyed by Strong Trade Figures
The Australian Dollar (AUD) is creeping higher against the Pound (GBP) this morning thanks to the release of another solid domestic trade balance during the Asian session.
According to data published by the Australian Bureau of Statistics (ABS), Australia registered a trade surplus of AU$4.87bn in April, slightly down from AU$4.88bn in March.
While this fell short of expectations of a rise to AU$5.1bn, this is still one of the strongest trade readings on record, something that reflects well on the ‘Aussie’ as it is often viewed as an earlier indicator of how Australia’s trade driven economy is performing.
Pound (GBP) Subdued in Wake of Poor PMI Figures
Meanwhile the Pound (GBP) remains subdued this morning as a lull in data leaves GBP investors to remain focused on the UK’s recent PMI figures.
Data published over the first half of the week revealed that the UK’s private sector struggled in May, with the manufacturing and construction sectors both contracting, while the service sector showed only modest growth.
When viewed together, the PMI readings suggest that UK growth has stagnated so far in the second quarter.
Potentially even more worrying is that employment growth in the private sector has dramatically fallen over the last couple of months, indicating that firms aren’t confident about the future.
GBP/AUD Exchange Rate Forecast: Sterling Volatility to Rise as Tory Leadership Race Formally Begins?
Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate may becoming increasingly volatile over the coming weeks as political uncertainty in the UK likely starts to dominate Sterling sentiment once again.
Theresa May will step down as leader of the Conservative Party tomorrow, at which time the race to replace her as PM will officially begin.
GBP investors are worried that the risks of a no-deal Brexit are likely to rise if a hardline Brexiteer becomes the next PM, an outcome that bookmakers suggest is quite likely.
Furthermore, investors are concerned about the prospect of a prolonged leadership contest dragging out the uncertainty as 10 candidates remain in the running and will need to be whittled down to just two before the vote is put before Tory members.
Meanwhile, in the absence of any more notable data this week, AUD investors may turn their attention to next week’s session and the release of Australia’s latest employment figures.
Given the Reserve Bank of Australia’s current focus on employment, the data will be watched closely for any signs that the domestic job market may have slowed again in May, with another lacklustre reading likely to increase the chances of a second rate cut.