GBP/AUD interbank rates remain marooned under 1.85, with the pound suffering a further dip in confidence following the European election results.
|Currency Pair||% Change (Month)||Difference on £200,000|
Whilst the downturn was not as aggressive as some may have expected following the decimation of the UK’s two leading political parties, the pound may have found an element of support due to the dovish outlook for the Australian economy which has stagnated over the first two quarters of 2019. This stagnation followed an aggressive dip during 2018 with the slowdown in global trade directly affecting the Australian market, which in turn negatively impacted the value of the AUD.
With pressure growing on the Reserve Bank of Australia (RBA) to cut interest rates from their current record lows of 1.5%, it may be that investors are already pricing in a cut at their next policy meeting which in turn could help to support sterling’s value.
If this is the case then sterling’s value is being almost artificially supported, a scenario which will likely leave investors feeling uneasy about which direction the pair may take over the coming months with the on-going fallout from Brexit likely to sap further confidence over the coming months.
With the UK set for a change in political direction it may be that a new Prime Minister can salvage Brexit and with it a return in market confidence, but for the time being that scenario seems unlikely. Therefore, those clients with a GBP/AUD currency exchange requirement may choose to avoid the risk of a further sell-off of the pound should the UK fail to make any inroads with its Brexit deal before the extended deadline, which comes at the end of October.
The recent and very unexpected Australian general election results also add a further element of uncertainty to proceedings, with a Labor win many were predicting not materialising.
The result went against the vast majority of the opinion polls, which for almost two years prior to the general elections put the Labour party ahead of the more conservative coalition, led by the now Prime Minister Scott Morrison.
How the new government’s policies will affect the Australian economy will be realised over time but for now the markets have taken a cautious approach to the new regime and with the Brexit undertone likely to continue to drive market sentiment and much of sterling’s value, it may be that the pound struggles to make any sustainable inroads against the AUD in the short-term.
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