April 20, 2017 - Written by Ben Hughes
STORY LINK GBP AUD Exchange Rate Steady as UK General Election Campaigning Begins
The Pound Australian Dollar (GBP AUD) exchange rate continues to hold close to the best levels it struck earlier this week as UK politicians begin the first day of campaigning ahead of the snap election in June.
Sterling sentiment has shot up since the early election was first announced on Tuesday, with markets speculating that the Conservatives are likely to claim a landslide victory, granting Prime Minister Theresa May with a larger majority in parliament and preventing opposition parties from attempting to block her move to leave the single market.
GBP investors believe that this will also give May a stronger hand in dealing with the EU in the upcoming Brexit negotiations and silence criticism that she is an unelected PM that does not necessarily represent the people of Britain.
However May’s opponents have shown that they willing to fight tooth and nail against the Tories, with Labour Leader Jeremy Corbyn vowing to ‘overturn the rigged system’ as he launches what looks set to be an anti-establishment campaign.
Markets are unlikely to be too fazed by Corbyn’s proclamation however as Labour currently trails around 24 points behind the Conservatives in the most recent opinion polls.
Meanwhile the Australian Dollar was able to stave off any further decline as prices for the nation’s largest export, iron ore appear to have momentarily found their feet, bringing an end to the downturn seen in recent sessions.
According to Metal Bulletin, the price of higher grade iron ore rose by 2.22% to $64.60 a tonne overnight on Wednesday, helping to slightly offset the 4.6% decline seen a day earlier.
However with prices still having fallen 31.9% from the high of $94.86 a tonne struck in late February investors are starting to speculate that it will drag on Australia’s economy.
Some traders are now even beginning to price in a 20% chance that the Reserve Bank of Australia (RBA) will move to lower interest rates to 1.25% in September, although the consensus still suggests that rapidly rising house prices and high levels of household debt would prevent such a drastic course of action.
Looking ahead the Pound is likely to stumble in tomorrow’s session following the release of the UK’s latest Retail Sales Figures, with economists predicting that sales will have plummeted from 1.4% to -0.2% in March due to the late start to Easter this year.
Meanwhile the Australian Dollar it likely to remain closely tied to the value of iron ore over the coming days as a lull in domestic data until the release of the first quarter inflation report next Wednesday will leave AUD investors little else to focus on.
At the time of writing the GBP AUD exchange rate was trending around 1.70 and the AUD GBP exchange rate was trending around 0.58.
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TAGS: Australian Dollar Forecasts Currency Predictions