GBP/AUD remain high in the midst of election uncertainty
Sterling has been performing very well vs the Australian dollar recently and it appears to be remaining relatively high. GBP/AUD exchange rates are now close to their highest level since the Brexit vote back in June 2016.
Optimism has been high and it appeared as though up until last week that a deal was getting closer to being concluded. This optimism helped to push the Pound up to over a three year high vs the Australian Dollar.
Yesterday, a vote was held in parliament to have a general election but this was rejected last night as it needed two thirds of parliament to agree to holding a general election. The next UK Budget was also due to be published on 6th November but this has been cancelled owing to the increased chances that we’ll see a general election before the end of the year.
Boris Johnson will shortly announce further plans in order to have a general election due to be held on 12th December. The debate will begin later today in an attempt to get things moving forward. Parliament will need to be dissolved for a minimum of 25 working days before the date of the election which will allow enough time to get things organised. It appears as though both the Lib Dems and the SNP will look to propose stopping Brexit so it will be interesting to see what happens during the next few days.
Will the RBA cut interest rates again?
In the meantime, turning the focus to what is happening in Australia, things don’t look too rosy at the moment. The MD of Bendigo and Adelaide Bank has claimed that ‘recent cuts to the official cash rate…in a perverse way is having the opposite effect.’ The RBA has cut interest rates to its lowest level in history and there could be further interest rate cuts ahead. Therefore, although things remain politically uncertain in the UK the Australian economy is itself feeling the effects of monetary policy. Markets predict that we could see another interest rate cut in early 2020 so this could potentially cause problems for the Australian Dollar early next year.
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