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Pound Australian Dollar Exchange Rate News: GBP/AUD Fluctuates on UK Political Uncertainty

May 25, 2022 - Written by John Cameron

Pound (GBP) Wavers Ahead of Report Findings

The Pound is recovering today after falling sharply yesterday over the troubling service PMIs, but with the release of the Sue Grey ‘partygate’ report, Sterling’s upside potential appears limited.

With the public release of Grey’s report, the findings don’t appear to be as damning as previously thought.

An alleged party on 13th November 2020, hosted by Carrie Johnson, the PM’s wife, was of particular interest as neither were fined, but it would appear Grey never fully investigated the party.

In a Tweet upon reaction to the report, the Observer’s Michael Savage says:

“Some damning details in the Sue Gray report... but the person who comes out badly (Martin Reynolds) has already departed - and the event that could've caused most problems for Johnson (the flat party) not investigated.”

Boris Johnson is due to make a statement on Sue Grey’s report today, and with the Prime Minister appearing to have escaped relatively unscathed from the report, political stability would be favourable for the Pound.

Australian Dollar (AUD) Draws Support from Hawkish RBA

The Australian Dollar (AUD) is inspiring movement after the Reserve Bank of Australia (RBA) signalled a bigger interest hike is still possible for June. This comes after the central bank hiked interest rates in May, its first since 2010. RBA Assistant Governor Luci Ellis spoke at a conference in Sydney, reiterating the hawkish stance that has drawn widespread support from investors:

"There will be more rate rises from here.”

Ellis also goes on to mention the Australian housing industry is at capacity, and the ongoing supply chain issues weigh heavily:

“Australia's housing industry has a strong pipeline of new work but faces global supply disruptions and rising material costs which are delaying completions and squeezing margins.”

With the ongoing global supply chain disruptions continuing, made worse by China’s strict Covid measures and restrictions, the unabating Ukraine crisis also weighs heavily on the risk-sensitive ‘Aussie’, subduing the currency.

This is helping to limit the ‘Aussie’s losses today as a risk-off mood may otherwise have pushed the currency lower.

GBP/AUD Exchange Rate Forecast: Strong Political Headwinds Ahead?

Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate could encounter more pressure and increased movement with political and economic headwinds on the horizon.

Johnson is due to make a make a statement later this afternoon on the report, as he faces stiff questioning over his conduct throughout the lockdown.

A potential boost to the Pound could come in the form of a government plan to help support people with the rising cost of living. Both the Prime Minister and Chancellor have been under intense pressure to act as soaring energy and food prices weigh heavily on households. The proposed plan could be announced as early as Thursday.

Meanwhile the release of Australia’s latest retail sales figures could buoy AUD exchange rates at the end of the week as April’s figures are expected to report another robust expansion in sales growth.

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TAGS: Pound Australian Dollar Forecasts

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