Expect more volatility for the Pound to Australian dollar exchange rate
Pound to Australian dollar exchange rates have lost considerable ground over the last week although there does appear to be some support with rates holding firm above 1.75 for the Pound to Australian dollar rate. Much of the market movement and volatility has stemmed from the recent uncertainty in British politics, which has resulted in a sharp fall in sterling exchange rates. Expect a volatile week for the Pound to Australian dollar exchange rate, which will largely be driven by continued uncertainty over Brexit.
After an agreement was reached last week for the draft withdrawal agreement, the 575 pages in the weighty document are now being heavily scrutinised by Parliament, who will ultimately decide whether to vote in favour for this deal. The meaningful vote is not expected to take place until the middle of December which leaves a long period of uncertainty in these coming weeks.
Will Theresa May remain as Prime Minister?
Perhaps more pressing will be whether the total of 48 letters will be reached by Conservative Party members which would trigger a vote of no confidence in Prime Minister Theresa May.
This threat of a leadership challenge is keeping the currency markets guessing and there could be a number of opportunities in these coming days depending on how events turn out. So far the Prime Minister is proving incredibly resilient but the arithmetic in Parliament is not working in her favour. If she cannot persuade Parliament to vote for her Brexit deal at a time when there are so many that are unhappy with it then the prospect of a no deal scenario will start to look more and more likely which would be damaging for the pound to Australian dollar forecast.
Strong jobs data leads to Australian dollar strength
It’s not just the weakness in the pound causing the drop in the rates. There has been a boost for the Australian dollar following strong employment numbers last week. Full time employment saw an additional 42,300 jobs created in October which was double the September figures, pointing to a better outlook for Australian jobs. Australia, like much of the rest of the developed world has been battling with low inflation and weak wage growth.
The Reserve bank of Australia will now be hoping that things are finally starting to improve and these better employment numbers should be the first step forward for wage growth and higher inflation. The markets are already starting to price in the prospect of an interest rate hike in 2019 with many commentators suggesting August of next year could be the time for that first rate hike, after 2 years of interest rates down under at record lows.
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