The pound to Australian dollar exchange rate has fallen significantly lower as Brexit drives the pound down ahead of a new British Prime Minister to be announced next week. GBP vs AUD has fallen to 1.7720 which has presented a good opportunity for those looking to sell Australian dollars to buy pounds. The direction of travel will now be heavily impacted by events next week once the new Prime Minister is in place on Wednesday. Boris Johnson is seen as the expected victor over Jeremy Hunt and any statements he makes will likely see considerable volatility for the GBP to AUD pair.
There have been reports that Boris could seek and early general election which would add another layer of political uncertainty to an already weak pound. The prospect of a Labour government or the alternative of a Conservative / Brexit party coalition of sorts would likely see the pound weaken in these outcomes both of which are credible. The reality is that there are a number of Conservative MP’s which may vote against the government in a confidence vote which would then lead the way to a general election. With a handful of remain MP’s who seek to remove a no deal Brexit in its entirety nothing can be ruled out at this stage.
The Australian dollar has proved extremely resilient against the pound despite weak growth number from China earlier I the week which showed growth to be the slowest in 27 years largely attributed to the US China trade war. With the trade dispute showing no signs of resolve just yet the Australian dollar could find itself reacting to any further developments and the performance of the Chinese economy. The markets at least took stock that some of the most recent numbers coming out of China were showing some signs of improvement. The truce on further tariffs between the US and China may help the Chinese economy for the time being but until a deal is in place it could be a bumpy ride for the Australian dollar.
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