The pound to Australian dollar exchange rate has found support despite the uncertainties surrounding Brexit and the imminent change in Prime Minister.
What factors are affecting pound to Australian dollar rates?
Whilst GBP/AUD has come under pressure in recent weeks as a result of a no deal Brexit outcome becoming a viable option once again, the escalation in US trade wars is weighing heavy on the Australian dollar as is the performance of the Australian economy. The Reserve Bank of Australia cut interest rates this week to the lowest level on record at 1.25% highlighting the gloomier outlook for the Australian economy. There is talk of a further cut which may come as soon as August which will likely put added pressure on the AUD exchange rate.
Brexit uncertainty continues to weigh on pound to Australian dollar rate
Brexit uncertainty continues to be the major driver for sterling exchange rates and the Conservative party are in the midst of a leadership contest to find the next British Prime Minister. This is hugely important as new leadership will invariably bring a different approach to Brexit which is what the markets are interested in. Some candidates who are pro-Brexit have indicated their intention for Britain to leave the EU by the 31st October. Others such as the Environment Secretary Michael Gove have suggested delaying Article 50 to allow more time to reach a deal with the EU.
The more likely a no deal outcome, the more the pound will drop further. Those looking to buy or sell Australian dollars would be wise to plan around these important developments. A new Prime Minister should be in place in the next 6 weeks. GBP to AUD rates would likely fall sharply in the event of a no deal Brexit.
US China trade war
The US remains engaged in a trade war with China which has seen tensions escalate and one which could see tariffs on all goods between the UDS and China if the spat is not resolved. US President Donald Trump has gone further and applied tariffs of 5% on Mexican exports which take effect on Monday. It is widely expected that the President will seek to apply tariffs on European cars which could result in a global trade war across many borders. This would be a further escalation which would not bode well for the Australian dollar. The Australian dollar would likely weaken further in the event of weaker global trade.
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