GBP to AUD forecast – Sterling Strengthens

How Will the Election Influence GBP/AUD Exchange Rates?

The pound to Australian dollar exchange rate has jumped higher on the back of a decision by UK Prime Minister to hold Brexit talks today with the leader of the opposition Party Jeremy Corbyn. The markets reacted positively to the news as hopes have been rebuilt that a deal will eventually be reached with a compromise made to allow for a smooth withdrawal from the EU.

The Labour party has been championing a Customs Union, something the Prime Minister has been reluctant to adopt as it would require the need for freedom of movement to continue which was one of the big sticking points in the 2016 referendum. If some middle ground can be found to unite parliament and the country then the pound could see further gains. For the time being the prospect of a no deal is looking less likely as the government will now likely ask for a small delay to Brexit to hopefully have a deal in place by 22nd May, the last date available before Britain would have to include itself in European elections. The prospect of a no deal has been the major contributor to the fall in the pound and the fact it is looking less likely now bodes well for GBP vs AUD.

Any statements from the two leaders will likely help direct sterling exchange rates and influence the GBP to AUD pair in these coming days. Rates for GBP/AUD are currently sitting above 1.85 creating a better window of opportunity for those looking to buy Australian dollars.

The Australian dollar has also come under some added pressure after a more dovish outlook from the Reserve Bank of Australia (RBA). The RBA held interest rates yesterday as widely expected at 1.5% although there was a focus on weaker growth, weaker inflation and also the weaker housing market. All point to a more dovish RBA which could lead to further weakness especially if the markets build in to its outlook the prospect of an interest rate cut this summer. Some commentators are even expecting as many as two rate cuts this year in Australia which should lead to Australian dollar weakness and really highlights how the global slowdown is having a big impact on the Aussie.

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