GBP/AUD Exchange Rate Undermined by Political Uncertainty
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning, coming under some modest pressure as UK political jitters rise ahead of next month’s general election.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9035, edging down from this morning’s opening levels.
Pound (GBP) Flat as UK Politics in Spotlight
The Pound (GBP) is struggling to find momentum this morning in response to recent political headlines.
Sterling enjoyed a sharp spike in the mid-week as YouGov’s highly influential MRP opinion poll predicted Boris Johnson will secure a convincing majority in next month’s election.
GBP investors favour a Conservative majority on the expectation it will provide more clarity on Brexit by allowing Johnson to pass his withdrawal deal.
However the Pound is struggling to build on these gains after Johnson was given a bit of a bruising by the media in the past couple of days.
This includes rising criticism of Johnson’s refusal to commit to an interview with the BBC’s Andrew Neil as well as Channel 4 empty-seating of the PM in its climate debate on Thursday.
General election 2019: Row over Boris Johnson debate 'empty chair' https://t.co/bzgrTQKEzE
— BBC Politics (@BBCPolitics) November 29, 2019
GBP investors fear that these sort of negative media headlines could hurt Johnson in the polls.
Australian Dollar (AUD) Muted amid US-China Tensions
The Australian Dollar (AUD) has struggled to find momentum through the latter half of the week in response to flaring tensions between the US and China.
This comes after US President Donald Trump signed the Human Rights and Democracy Act into law on Wednesday a week after the House of Representatives almost unanimously backed the bill.
The bill is aimed at protecting the rights of protestors in Hong Kong, by requiring an annual review into the cities autonomy to decide whether it still merits its special status with the US.
The signing of the bill has soured relations with Beijing, which warned it could take ‘firm counter-measures’ if the US remained on the ‘wrong path’.
This spat has unsurprisingly cast doubts over a possible phase one trade deal between the two countries, with the resulting drop in market risk appetite limiting the appeal of the Australian Dollar.
GBP/AUD Forecast: All Eyes on RBA Rate Decision Next Week
Looking ahead, a key catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate next week looks set to be the Reserve Bank of Australia’s (RBA) latest policy meeting.
While stubbornly low inflation and weak employment make a compelling case for the RBA to cut rates again in December, the general consensus is that the bank will stay pat next week.
As a result the focus is likely to be on the RBA’s forward guidance, with the Australian Dollar likely to face some headwinds if the bank indicates that it may implement additional monetary easing in 2020.
Also in focus for AUD investors will be the publication of Australia’s latest GDP figures on Wednesday, where another robust 0.5% expansion in the third quarter may offer some support to the ‘Aussie’.
Meanwhile, in the UK we can expect to see politics continue to dominate Sterling sentiment, with ongoing election speculation potentially stirring up more volatility.
In terms of data publication of the UK’s latest PMI figures will likely weigh on the Pound if they confirm service sector growth slumped to a three-year low in November.