Boris and Davis resignations could lead to Torie Leadership Challenge

EUR GBP Moves Higher Ahead of UK GDP Update

GBP/AUD – The progress of Brexit negotiations is a key factor in the value of GBP/AUD. The resignation of chief Brexit negotiator David Davis and Boris Johnson does not bode well for Sterling.

After Theresa May released her intentions for Brexit, David Davis announced he thought the deal was “unworkable” and quit. Angela Merkel has also stated the deal is unworkable.
Despite this the Pound remained robust against the Aussie and we did not see any significant falls.

The concern is that Johnson could try and oust May from her position. If a challenge is made Sterling could suffer. Political uncertainty historically weakens the currency in question.

There is also the ongoing trade war with China and the US which is certainly putting off investors moving to the Australian Dollar. Commodity based currencies are not the destination of choice in times of global economic uncertainty. China is the biggest purchaser of Australian goods and services and Chinese growth is likely to decline due to the trade war. This in turn will hit the Australian economy and the Aussie Dollar.

Despite the US initiating these trade wars the US Dollar continues to strengthen as investors move to the safe haven currency with high returns.  Ten year treasury bonds currently have the highest returns in over four years. The US Federal Reserve has hiked interest rates on two occasions this year and the expectation is that more will follow during 2018.

With the potential of a leadership challenge in the Tory Government it may be wise to move sooner rather than later. Waiting for 1.80 could prove costly.

GBP/AUD buoyancy levels are between 1.75-1.80. If you are buying AUD look to move when the market hits 1.79.

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