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Pound Australian Dollar (GBP/AUD) Exchange Rate Recovers Ground After Theresa May Resigns

May 24, 2019 - Written by Frank Davies

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Shrugs Off Theresa May’s Resignation

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate saw little reaction as Theresa May announced her resignation as leader of the Conservative Party and named a departure date.

With May set to vacate her post on the 7th of June markets look set for another few weeks of political uncertainty as Conservative MPs vie for leadership of the party.

Even so, the Pound remained fairly steady in the wake of the news as the move gave investors a degree of certainty in spite of the lingering risk of a no-deal Brexit.

A better-than-expected month of UK retail sales also offered encouragement to GBP exchange rates ahead of the weekend, with consumers largely continuing to shrug off Brexit-based uncertainty.

Australian Dollar (AUD) Looks for Boost on Weaker US Data

Although the Trump administration suggested that it could be open to reopening trade talks with China, potentially including embattled telecoms giant Huawei, this failed to boost the Australian Dollar.

The risk-sensitive currency remained on a weaker footing during trade on Friday as investors remain reluctant to bet on the chances of an imminent breakthrough in the US-China trade relationship.

However, AUD exchange rates could find a rallying point ahead of the weekend if the latest US durable goods orders figure contracts as forecast.

Evidence of greater weakness within the US economy would give investors some incentive to favour the Australian Dollar, with a fall in orders set to increase the odds of the Federal Reserve maintaining a cautious policy bias.

GBP/AUD Exchange Rate Vulnerable Ahead of European Parliament Election Results

The results of the European Parliament elections could provoke additional volatility for the GBP/AUD exchange rate on Monday.

If the Brexit Party makes significant inroads in the vote this could trigger a renewed bout of anxiety for investors, with the odds of a no-deal Brexit having already risen sharply.

A swing in support towards pro-EU parties, on the other hand, may encourage the Pound to recover some ground on hopes that this could mitigate the risk of a more hard-line Brexiteer Prime Minister.

Once the Conservative leadership election gets under way the Pound could struggle to find any particular degree of positive momentum, with uncertainty still weighing heavily on economic activity.

Ongoing US-China Trade Tensions Set to Limit Australian Dollar (AUD) Exchange Rate Upside

Support for the Australian Dollar could languish in the week ahead if trade tensions between the US and China show fresh signs of escalation.

Unless the two sides show signs of moving towards a potential compromise, reducing the likelihood of another round of tit-for-tat tariffs, AUD exchange rate upside may prove limited.

Any fresh slowdown in the Chinese manufacturing PMI could drag the Australian Dollar sharply lower as any dip into contraction territory would bode ill for the outlook of the world’s second largest economy.

Evidence of an increasing Chinese slowdown may weigh heavily on the antipodean currency next week, offering the GBP/AUD exchange rate a degree of support.
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