GBP/AUD Exchange Rate Sinks, Boris Johnson Continues to Demand Early General Election
The Pound Australian Dollar (GBP/AUD) exchange rate fell to around AU$1.825 today as the UK remains in a state of political deadlock after Parliament reopened on Wednesday.
The UK’s political uncertainties rose yesterday after Prime Minister Boris Johnson continued to insist on an early general election, while further maintaining his commitment for the UK’s exit from the EU on October 31.
As a result, Sterling has remained subdued against the ‘Aussie’ as opposition parties want a no-deal to be removed from the table before pursuing a general election. This has left the UK’s political situation in a stalemate.
Labour Leader Jeremy Corbyn commented:
‘[Boris Johnson] should have done the honourable thing and resigned. Yet here he is, forced back to this house to rightfully face scrutiny, without a shred of remorse or humility and no substance whatsoever… He says he wants an election. I want an election. If he wants an election, it’s very simple. Get an extension and we’ll have an election.’
In UK economic news, today will see a speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability for the Bank of England (BoE). Any dovish comments about the UK economy could see the GBP/AUD exchange rate sink deeper.
AUD/GBP Exchange Rate Edged Higher despite Mounting US-China Trade Tensions
The Australian Dollar (AUD) edged higher against the struggling Sterling despite rising geopolitical risks weighing on the risk-sensitive ‘Aussie’.
AUD traders remain jittery after China requested for the US to ‘remove all unreasonable [trade] restrictions’, leaving the two superpowers in a difficult position ahead of next month’s talks in Washington.
Wang Wi, China’s State Councillor and Foreign Minister, described the situation:
‘China-U.S. relations today have once again come to a cross roads… In a word, China’s efforts and achievements of reform and opening up in the past several decades have been widely recognized. They should not be deliberately ignored or denied.’
As China is Australia’s closest trading partner, this has left Australian markets feeling cautious as this now raises the odds of the Reserve Bank of Australia (RBA) cutting interest rates next week.
GBP/AUD Outlook: Improving US-China Trade Relations Could Boost ‘Aussie’
The Australian Dollar (AUD) will likely remain sensitive to geopolitical developments for the rest of the week, with few economic data releases due out until next week. Any indications of improving relations between the US and China would prove AUD-positive.
Pound investors will be looking ahead to tomorrow’s release of September’s GfK consumer confidence, which is expected to remain at -14. As a result, we are unlikely to see the Pound gain on the ‘Aussie’.
However, political developments are likely to remain in the spotlight for UK markets tomorrow.
Any indications the Conservative Government could maintain its hard-Brexit stance, despite mounting opposition and the anti-no-deal Hillary Benn bill in place, could likely weigh on the GBP/AUD exchange rate.