The pound to Australian dollar interbank exchange rate stands at 1.9254 today. This is 0.63% or over one cent below sterling’s 41-month high versus the Aussie, its strongest since June 24th 2016, reached yesterday, at 1.9377.
The sterling vs Australian dollar rate has fallen, because a trusted poll has highlighted the risk that there’ll be a ‘hung’ Parliament, at the UK’s election tomorrow.
A ‘hung’ Parliament is when no single party wins a majority of seats. As a result, though a government could be formed, it may struggle to pass laws or finalise Brexit.
Markets are concerned that, if this happens, the UK could run up against its current Brexit deadline, of January 31st 2020. In this case, the UK again runs the risk of exiting the EU with “No Deal”, or having to ask Brussels for yet more time. So this has weighed down sterling.
YouGov’s MRP Points to Reduced Tory Majority and Risk of a‘Hung’ Parliament
In particular, the GBP to AUD interbank exchange rate has lost out, because according to YouGov’s new MRP poll, the Conservatives are on course for a majority of just 28 MPs.
This is both below the 68 MPs predicted in YouGov’s last MRP a fortnight ago, and within the “margin of error”, meaning that the projected majority is small enough to be a statistical blip.
Until recently, investors had become increasingly confident that the Tories would win a majority of seats tomorrow, so YouGov’s trusted MRP has proven an unexpected reverse.
Oliver Allen, an economist with Capital Economics, writes that “the Conservatives failing to win a majority would come as a shock, and could result in a significant drop in the Pound.”
Australia’s House Prices Rose
Turning Down Under, Australia’s economic data this week has been mixed. On the bright side, house prices in the antipodean nation rose by 2.4% in Q3, from July to September, above forecasts for 0.2%. Similarly, NAB’s business conditions index rose by 2 points in November, to 4.
Yet on the other hand, Westpac’s consumer confidence index fell to minus 1.9% in December, below November’s 4.5%, highlighting the risks to Australia’s economy.
Looking to the rest of the week, all eyes will turn to the UK’s election results early on Friday, and its impact on sterling.
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