Australian election cause volatility for pound to Australian dollar rates

GBPAUD Rate: Renewed Risk Appetite Continues to Benefit the Australian Dollar

The general trend on pound to Australian dollar rates been that of the Australian dollar weakening predominantly due to the ongoing trade battle between the United States and China.

Australian dollar makes gains against sterling as Brexit political frictions continue

The trade war has had a significant effect on the Australian economy as China is Australia’s primary trading partner.

Despite this, the Australian dollar has benefitted from the political frictions in Britain over the last fortnight. This  has seen the Austalian gain around 4 cents against sterling, with interbank levels opening trading this week below 1.84.

How has the Australian election affected pound to australian dollar rates?

It is anticipated the Reserve Bank of Australia (RBA) is edging closer to their first change in interest rates since 2016. There are arguments to suggest these gains could be short lived, however over the weekend a shock result in the Australian general election saw Scott Morrison’s centre-right government hang on to secure victory, despite being behind in most opinion polls.

After the result, the pound failed to hold its ground and lost around 1 cent against the AUD, which pushed the GBP/AUD below 1.84.

It will be interesting to how sterling performs over the coming weeks, with the fourth meaningful vote of Theresa May’s proposed exit deal from the EU on the 3rd of June set to cause volatility. I believe in it’s current form it stands little chance of being put through. If this is the case expect further losses for sterling.

Will RBA interest rate cuts strengthen pound to Australian dollar rates?

There is little major Australian economic data releases this week and so investor attention will be primarily focused on the response to the Australian election and the speech from the Reserve Bank’s Governor Philip Lowe on Tuesday, which could provide an insight into monetary policy moving forward, in particular the next interest rate decision on June 4th.

Reports have suggested the bank could cut rates, which could see the rate drop below 1.5% for the first time in over 2 years, so any indication from Lowe that a change might be on the cards could see the Australian dollar weaken.

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