GBP’s strength in the upcoming weeks is solely focused on the outcome of the general election on the 12th of December. Analysts have noted that a Conservative party majority would swing in favour of getting Brexit done with a deal and would give GBP a vote of confidence with investors. They also mentioned that there is potential for GBP/AUD to rise to 2.0 should the Tories win the election outright, paired with QE fears surrounding the RBA.
GBP Could Be in for a Positive Boost Should the Conservatives Win the General Election Outright
One of Australia’s top high-street lenders, NAB, noted that the outlook for the Pound Sterling is binary, solely dependant on the outcome of the election. A Tory majority and win would see GBP rise as Brexit would have a better chance of being seen through and done so with an agreed deal. On the flipside, if Labour manage to make up lost ground and win the election, GBP has been forecasted to plummet. Opinion polls have betted a Tory majority as the single most likely outcome of the election, this has left investors with optimism for the December date.
A GBP Boost Would See AUD Slump in the Exchange Rate
Whilst a boost for GBP is great for the UK, this would mean that AUD would likely slump against the Pound in the cross. The Aussie Dollar has been underperforming of late and has done so partly due to the RBA sending off a dovish tone that has investors worrying about future interest rate cuts and QE methods. RBA governor Philip Lowe mentioned that the bank’s unconventional monetary policy is a tool which the RBA has in its arsenal which may at some point be deployed into boosting the Australian economy.
GBP/AUD Rate Could Reach the 2.0 Point, the Outlook for Both Currencies Is Dependent on Various Factors
For GBP, the election outcome will bear the most weight on the currencies performance in the new few weeks and ahead. A Tory majority would likely see GBP rise whilst a Labour majority would likely see GBP slip and let worry start to sink in. For the RBA, it would likely look to reverse some of the dovish comments expressed by RBA governors in recent speeches. In order to do so, AUD will be hoping for positive news surrounding the US-China deal as positive developments in the Chinese economy will likely boost Aussie exports.
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