The pound to Australian dollar exchange rate has fallen lower this morning with rates sitting just below 1.86 for the GBP vs AUD pair. Australia are preparing for a general election to be held 18th May to elect the next Prime Minister. Australia has seen an interesting time in its recent political history with no single leader serving a full term since 2007. In fact this will be the seventh leadership challenge in 12 years although this time round under new rules the Prime Minister will serve a full term which could bode well for the Australian dollar if some political certainty is established.
Such certainty could come at the right time for the Australian economy which is struggling to perform at the moment with calls by the Reserve Bank of Australia (RBA) that it may be cutting interest rates again. The RBA released its Monetary Policy Statement after last Tuesday’s interest rate decision which saw the decision to hold rates at 1.5%. The statement has highlighted that it would consider cutting interest rates if unemployment remained high whilst also citing the weak housing market again as reason to downgrade the growth forecasts. It follows a decision by the Reserve Bank of New Zealand this week to cut interest rates to record lows and whilst the two countries are independent the move may persuade the RBA to follow suit.
For GBP to AUD exchange rates the pound is still largely being driven by Brexit which remains deadlocked in the British parliament. Cross party talks between the Labour and Conservative parties have hit a roadblock with leader of the opposition Jeremy Corbyn stating that it is difficult negotiating with a “disintegrating government”. The next focus is the European elections being held 23rd May and could see considerable market movement for GBP AUD.
The polls have put Nigel Farage’s Brexit Party in the lead and if the reports are correct that there is a major shift away from the two main political parties then this could have a major impact on sterling exchange rates. A huge win for Nigel Farage could see sterling weakness with a sudden drop for GBP AUD. Those with pending GBP to AUD requirement would be wise to plan around this major event.
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