Pound Australian Dollar (GBP/AUD) Firms Despite Tory Infighting Unnerving Investors
The Pound Australian Dollar (GBP/AUD) exchange rate is strengthening modestly despite ongoing uncertainty surrounding the UK government’s fiscal plans.
At time of writing, the GBP/AUD exchange rate is around $1.7614, a 0.20% jump from this morning’s opening levels.
Pound (GBP) Wavers amid Political Turbulence
The Pound (GBP) is struggling for a clear direction today as Prime Minister Liz Truss attempts to restore authority at the Conservative party conference.
After reversing the controversial decision to abolish the highest tax rate, Truss is facing an uphill struggle to restore faith in her government. A widening lead for Labour, combined with a divided Tory party, ongoing political uncertainty is likely to weigh on GBP investors.
After 24 hours of confusion surrounding the publication date of the long-awaited fiscal plans, the Treasury has confirmed economic forecasts will be published later this month. Details on how the UK government intends to fund their growth plans could allay investors’ fears, and the Pound could climb.
Meanwhile, providing some modest support to the Pound was the final services PMI release. With fears of a 20-month low, the final reading came in at 50. Despite avoiding the first drop since February 2021, a stalling of the sector is unlikely to provide much relief. A revised higher of 50 reading from a preliminary 49.2, narrowly missed contraction. But it still shows the lowest reading in 19 months amid inflationary pressures.
Australian Dollar (AUD) Subdued amid Risk-Averse Market Mood
Meanwhile, the Australian Dollar (AUD) is also struggling to find much demand. Rising geopolitical tensions has turned the market cautious.
With the US announcing it intends to send more military aid to Ukraine, Russia’s ambassador to the US has warned of the consequences. Anatoly Antonov, Russia’s ambassador to the United States, said:
‘We perceive this as an immediate threat to the strategic interests of our country.
‘The supply of military products by the U.S. and its allies not only entails protracted bloodshed and new casualties, but also increases the danger of a direct military clash between Russia and Western countries.’
A dovish Reserve Bank of Australia (RBA) is also keeping pressure on the ‘Aussie’. In the wake of the smaller-than-expected rate hike of 25bps, investors continue to remain subdued.
Pound Australian Dollar Exchange Rate Forecast: Truss Speech to Restore Confidence?
Looking ahead, the Pound Australian Dollar exchange rate could see further fluctuations as Truss is set to close the Conservative Party conference. She isn’t expected to make any new announcements, but any further comments on fiscal policy could weigh on the Pound.
Elsewhere, with data remaining thin on the ground, global market sentiment will likely be the biggest influencer on the ‘Aussie’. Escalating geopolitical tensions could further weigh on the risk-sensitive Australia Dollar.