Australian Dollar Weakens as Unemployment Increases Down Under, What Next for GBP/AUD?

Australian Dollar Weakens as Unemployment Increases Down Under, What Next for GBP/AUD?

The pound has gained against the Australian dollar in the early hours of this morning, pushing the GBPAUD close to the highest levels seen within the past 3 years and 5 months.

Sterling Highs Against the Australian Dollar

The highest levels seen since June of 2016 are 1.9093 and earlier this morning the pair reached a high of 1.8898 so the rate is getting close to testing those levels once again. The reason for the 0.5% gain so far today is mostly down to Australian dollar weakness, as Australian unemployment has increased to 5.3% and this has increased the chances of another interest rate cut from the Reserve Bank of Australia (RBA) in the upcoming future. Pressure is also mounting on the current government led by Scott Morrison, who is already feeling the heat owing to the wildfires faced by Australia and the response to it.

Financial markets expect to see another 0.5% interest rate cut from the RBA in February next year and this is being priced in at 64% chance whereas prior to this morning’s release expectations sat at 44%.

UK General Election Continues to Drive the Pound

Domestically the main driver of GBP value revolves around the upcoming general election on the 12th of December and this will be the first December election in almost a century. The topic of the floods in Yorkshire as well as other parts of the country have already been used to score political points and the parties will have to contend with campaigning during darker evenings and poor weather conditions.

At the time of writing the Conservative Party remains favourites, but there could be some bumps in the road that could impact GBP exchange rates so it’s worth watching the polls for updates.

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