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Pound vs Aus Dollar: Falling GBP/AUD Exchange Rate as UK Political Uncertainty Continues to Taint Pound

March 23, 2015 - Written by David Woodsmith

Pound Falls versus Aussie (GBP/AUD) Exchange Rate as UK Political Uncertainty Continues to Taint Pound Sterling



The Pound fell against the Australian Dollar on Monday as general election fears continued to weigh on the UK currency. The May general election could signal a massive political shakeup which would consequently weigh on sentiment and UK economic growth—a development which is likely to put significant pressure on the Pound. However, as the election draws closer, political parties try desperately to sway voters their way and debate amongst parties heats up. One Conservative candidate, Afzal Amin, has been suspended after accusations were raised over a potential deal with the English Defence League (EDL) in an attempt to win votes. Amin commented: ‘I have got to make my case on Tuesday to the Conservative party and I want to make a robust defence of my actions and I want to ensure the party that I am a loyal party member and a party supporter, and I look forward to seeing a Conservative victory in May and David Cameron returned as prime minister.’

However, in the next few months as politicians become more aggressive in their stances, the Pound is likely to be under serious pressure. Any slowdown in growth could seriously see the Bank of England restrain from hiking interest rates—a move eagerly anticipated by many investors. In addition, UK Trends Total Orders slipped in March from 10 to 0, despite economists expecting a smaller dip to only 9.

Meanwhile, the Australian Dollar has been softer against a variety of peers as investors speculate that the Reserve Bank of Australia could potentially cut rates in the next monetary policy meeting. The central bank has been pegged to keep cutting rates in an attempt to encourage economic growth; however, such a move could see the housing market heat up significantly. Industry expert Phillip Moffitt commented: ‘The most obvious and direct beneficiary of this environment will be continued real asset appreciation, particularly houses because they’re easy for people to buy, it’s easy to transact and it’s visible and tangible. It seems to me that the RBA has just accepted that a strong housing price move is an acceptable consequence, it’s the lesser of two evils basically.’

However, Monday could see the Australian Dollar reclaim some losses with the release of Australian Weekly Consumer Confidence and the Australian Conference Board Leading Index. Furthermore, RBA officials are scheduled to speak throughout the week which could impact the ‘Aussie’.

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