Sterling vs Australian Dollar Rate Hits 41-Month High, on Tory Lead in YouGov MRP Poll

Sterling vs Australian Dollar Rate Hits 41-Month High, on Tory Lead in YouGov MRP Poll

The pound to Australian dollar interbank exchange rate stands at 1.9143 today at the time of writing. This is its highest in 41 months, or since late June 2016, right after the UK’s Brexit referendum.

In part, this is because a closely-watched opinion poll yesterday suggests that the Conservative Party will win a majority, at the UK’s general election on December 12th. This would enable Prime Minister (PM) Boris Johnson to form a stable government, and pass the Brexit agreement.

However, it’s worth noting that other opinion polls this week show that the gap between the Tories and Labour is shrinking, which may affect sterling too.

Looking Down Under, the Australian dollar has weakened, because although the RBA (Reserve Bank of Australia) signalled that it won’t cut interest rates below 0.0% nor initiate Quantitative Easing (QE) this week, markets still expect Australia’s central bank to reduce borrowing costs further in 2020.

YouGov’s MRP Poll Points to Tory Victory, Although Other Polls Show Lead Diminishing

The sterling vs Australian dollar interbank exchange rate has hit this 41-month high today, because yesterday, YouGov’s trusted MRP poll showed that the Tories will win a majority of 68 MPs, at next month’s UK election. In particular, the Conservatives may win 359 seats, next to Labour’s 211 seats.

Markets pay special attention to YouGov’s MRP poll, because it was the only survey to predict that former PM Theresa May would lose her majority of MPs, at 2017’s election. So investors hope that this will bring predictability to the UK’s outlook.

However, looking to the fortnight until polling day, polls by ICM, Kantar and Savanta ComRes all show the Tories’ lead shrinking this week. This may affect the pound, up to December 12th.

Australian Dollar Weakens, Although RBA Says It Won’t Cut Rates Below 0.0% or Begin QE

Meanwhile, the Australian dollar has weakened, because although RBA Governor Philip Lowe said that Australia’s central bank won’t cut interest rates below 0.0% earlier this week, nor begin a policy of extraordinary monetary stimulus known as QE, investors still forecast that the RBA will reduce borrowing costs in 2020.

The RBA looks likely to cut interest rates beneath their current 0.75%, because Australia’s unemployment remains at 5.3%, well below the central bank’s 4.5% target, and inflation sits below the central bank’s 2-3% range.

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