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Pound to Australian Dollar Exchange Rate: GBP/AUD Rallies as Theresa May Forecast to Survive Leadership Challenge

December 12, 2018 - Written by Frank Davies

GBP/AUD Exchange Rate Trading Higher after May Wins Confidence Vote


With PM Theresa May winning the vote of no-confidence, the Pound Sterling to Australian Dollar (GBP/AUD) was able to continue trading in the region of $1.75. 

Data published overnight showed that Australian consumer inflation expectations rose from 3.6% to 4.0%.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Recovers over 2 Cents

 With the Pound climbing across the board ahead of the vote of no confidence against PM Theresa May, the Pound to Australian Dollar (GBP/AUD) exchange rate was able to recoup over 2 cents.
GBP/AUD advanced by more than 1%, taking the pairing from lows of AU$1.7288 to highs of AU$1.7537.

 While the no confidence vote will be the most significant cause of GBP/AUD movement in the near future, Australia’s consumer inflation expectation report will also be of interest.

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Shrugs Off Conservative Leadership Challenge

With 158 Conservative MPs reportedly prepared to support Theresa May in the no confidence vote on Wednesday evening the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate found fresh support.

Investors were encouraged by the prospect of an end to the political uncertainty that has gripped markets, at least for the time being, even as worries over Brexit remain.

As long as May survives the leadership challenge the GBP/AUD exchange rate is likely gain additional ground, although the threat of a potential general election persists.

However, as it remains to be seen whether May can secure parliamentary backing for the proposed EU Withdrawal Agreement the Pound still looks vulnerable to selling pressure in the days ahead.

Risk Appetite Fails to Shore up Australian Dollar (AUD) Exchange Rates

Confidence in the Australian Dollar was rather muted on Wednesday morning, in spite of the general increase in market risk appetite.

While trade tensions between the US and China look set to thaw, with China preparing to reduce tariffs on US car imports, this failed to shore up AUD exchange rates.

A minimal improvement in December’s Westpac consumer confidence index put the Australian Dollar under pressure instead.

As sentiment within the Australian economy continues to show signs of caution, underlining a wider lack of confidence in the domestic outlook, the gains of AUD exchange rates were naturally limited.

With markets expecting the Reserve Bank of Australia (RBA) to leave interest rates on hold in the coming months there was little incentive to favour the Australian Dollar at this juncture.

Weaker Australian Inflation Expectations May Limit Australian Dollar (AUD) Exchange Rate Upside

December’s Australian consumer inflation expectation survey could put further pressure on AUD exchange rates on Thursday.

If signs point towards weakening inflationary pressure this is likely to give the RBA additional incentive to leave monetary policy on hold.

Focus will also fall on the latest RBA Bulletin, which may paint a less encouraging picture of the Australian economy.

Unless the report reflects a greater sense of confidence in the economic outlook the mood towards the Australian Dollar is likely to sour further.

However, if market risk appetite remains elevated, thanks to global trade developments and weaker US data, AUD exchange rates may see limited losses.

Pound Sterling (GBP) Exchange Rates Remain Vulnerable to Brexit Uncertainty

Even if political tensions in the UK calm in the days ahead the Pound may struggle to shake off market anxieties over Brexit.

With the March deadline fast approaching, and with the vote on the Withdrawal Agreement pushed back until January at least, a sense of uncertainty is set to persist for some time to come.

As the lack of clarity over the shape of the UK’s future relationship with the EU has already put pressure on domestic growth this continued delay risks stalling the economy further in the fourth quarter.

Another contraction in the RICS house price balance could put additional pressure on the GBP/AUD exchange rate, meanwhile, as the UK housing market struggles to pick back up.

Unless the house price index shows a sharp rebound on the month in November the Pound is likely to remain on the back foot against its rivals.
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