Over the last 30 days GBPAUD exchange rates have fluctuated in the higher 1.70s with minimal movement as both currencies seem to have been devaluing at the same pace. At the latest Reserve Bank of Australia meeting officials showed concern in regards to the trade tariffs that have been imposed on China by the US. The Australian know that a slowdown in China will have an impact on the Australian economy. Furthermore the International monetary fund have waded into the debate and announced an all out trade war will end up costing the global economy over $430bn.
UK Prime Minister Theresa May is under extreme pressure and last night threatened Tory rebels that she would call a general election if the amendment in regards to the customs union went through the Commons. The uncertainty of another General election would certianly weigh on the pounds value. Furthermore Governor of the Bank of England Mark Carney also failed to help the pounds value yesterday, as he stated a Brexit no deal would mean the Bank of England would have to rethink their future plans.
At the end of the week, UK politicians break for the summer holidays, therefore I expect Brexit related news to go quiet for a few weeks. All eyes will turn to the Bank of England’s interest rate decision early August. The market has been pricing in a hike, however I expect the Bank of England will fail to deliver which will mean sterling takes a hit. Therefore I wouldn’t be surprised to see GBPAUD fall back towards the mid 1.70s over the next month.
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