The pound to Australian dollar exchange rate has fallen lower following the Australian election result which has helped boost the Aussie dollar. Prime Minister Scott Morrison has been re-elected despite being behind in the polls in the campaign. This campaign was won on economic management, tax cuts and the pledge to return to a budget surplus.
There is a good short term opportunity for those looking to sell Australian dollars for pounds with rates for AUD GBP having moved to 1.84 for the pair. Whether the Australian dollar will continue to strengthen remains to be seen. The Reserve Bank of Australia is potentially looking to cut interest rates in the months ahead and this could see Australian dollar weakness. This will be the first time the central bank will have changed rates since 2016 and could see a big movement in the Australian dollar.
UK Politics are also about to create volatility for GBP vs AUD with the European elections to be held this Friday. There is a growing expectation that the two major political parties will be punished at these elections like never seen before and could help redirect the debate on Brexit. A big shift to the newly formed Brexit Party under Nigel Farage will likely reinforce the Leave vote and put pressure on politicians to deliver on Brexit and potentially with a cleaner break.
A drop in the price of sterling may be seen if the electorate vote for the Brexit Party in large numbers. Following this the fourth and final meaningful vote on the current withdrawal agreement will be held week commencing 3rd June. If the Prime Minister is unable to push through her Brexit deal in the House of Commons then the options on Brexit are either no deal or revoke Article 50 altogether. Either of these outcome would likely see a major volatility for sterling exchange rates and the GBP to AUD pair.
The Australian dollar may be influenced by a speech from US Fed Chair Jerome Powell on Tuesday. The US Fed have changed tact on the rate cycle having paused on any further rate hikes. The Fed has indicated that it would like to start to keep the markets guessing as the Fed has done historically and so any sudden shift could impact both the US and Australian dollars. Changes in the US have direct knock on effect on the Aussie dollar as the divergence between the two economies is calculated by investors.
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