Sterling spikes after May is announced as new PM, more good news to follow? (Joseph Wright)

AUD to GBP Sees Losses as UK Moves Ahead on Vaccines

Sterling exchange rates spiked upward across the board just after lunchtime today as Andrea Leadsom, who was Theresa May’s biggest rival for both the role of Prime Minister and as the new leader of the Conservative Party here in the UK, stepped down allowing Theresa May to accept the positions.

Mrs May announced that she was “honoured and humbled” to be the new PM-in-waiting and markets received the news well. The Pound moved upwards across the board due to what I believe is more political certainty, something markets almost always receive well, and also the fact that May was a ‘remainer’ in the lead-up to the EU Referendum may instill some confidence in investors, as although many were happy to see the ‘Brexit’, currency markets didn’t with the Pound plummeting in the immediate aftermath of the vote. The term ‘Soft Brexit’ is doing the rounds on financial media which would explain my thinking on this matter.

Later this week on Thursday the Monetary Policy committee will be outlining monetary policy moving forward, and many are expecting an interest rate cut down from 0.5% to 0.25%.

Should this occur, and some economists have the figure down for a 74% chance of a rate cut which is up from 11% before the Referendum result, then I think we can expect to see the Pound fall further and wipe away today’s gains for example.

At the same time, if there isn’t an interest rate hike this could bode well for the Pound and may suggest that the economy hasn’t been hit as badly as many have envisioned, which could boost the rate of exchange for GBP/AUD.

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