I expect GBP/AUD to experience high volatility short term. Apart from the small matter of Britain leaving the EU, there is also the Australian General Election taking place this weekend. Historically, during times of political uncertainty the currency in question will weaken in value. However, I do feel this is being countered by the uncertainty surrounding the UK’s political and economic future.
Sterling has taken a knock against the majority of major currencies after Mark Carney, the governor of the Bank of England’s (BOE) speech. He indicated there could be a possible interest cut from the already record low of 0.5%. He also mentioned further quantitative easing (QE) could be implemented. QE is essentially pumping money into an economy in order to stimulate growth. If this occurs it will surely weaken the Pound.
Despite the fact there is the potential for further Sterling weakness, I would still be very tempted to take advantage of current GBP/AUD levels if I was an Aussie Dollar seller. GBP/AUD currently sits at the most favourable levels for sellers since September 2014. To procrastinate in the hope of small gains could prove costly. It is important to remember that if a party wins in the Australian general election that is seemed less economically stable than the competition AUD could weaken. Also take into account, China whom Australia heavily rely on for their exports are looking unstable. There has been recent stock market crashes where circuit breakers were triggered to avoid panic selling and rumours of distorted economic data and shadow banking refuse to go away.
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