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Pound Australian Dollar Exchange Rate News: GBP/AUD Rangebound amid UK Political Uncertainty

May 26, 2022 - Written by John Cameron

GBP/AUD Rangebound amid UK Political Uncertainty

The Pound Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning, continuing the overnight trend.

The Pound (GBP) is struggling to gain any meaningful momentum as political uncertainty prevails, though yesterday’s publication of the ‘partygate’ report wasn’t as damning as predicted. Meanwhile, the Australian Dollar (AUD) is mixed today as China’s Covid lockdowns continue to weigh on market sentiment.

At the time of writing, the GBP/AUD exchange rate is trading at approximately $1.77.

Pound (GBP) Subdued amid UK Political Anxiety

The Pound is flat against the Australian Dollar this morning following the publication of Sue Gray’s ‘partygate’ report yesterday.

The final report highlighted ‘failures of leadership and judgement’ in Downing Street as well as officials’ inability to abide by the ‘standards expected of the entire British population.’

Reports suggest that at least one additional letter of no confidence was sent to the 1922 Committee. Experts predict approximately 50 letters have now been received. Should the committee receive 54 letters, a vote of no confidence can be called.

However, the report has been seemingly less disruptive to UK politics than expected. Although many MP’s – both the opposition and Conservative – have called for Johnson’s resignation, it seems likely his premiership will survive, to the relief of GBP investors.

The focus now turns to UK Chancellor of the Exchequer, Rishi Sunak, who is expected to announce a new a new cost-of-living support package.

This comes as household incomes struggle to keep up with rising energy prices and soaring inflation, which hit 9% in April.

If Sunak’s support measures are enough to aid struggling families in real terms, it may bolster GBP exchange rates today.

Australian Dollar (AUD) Mixed as Lockdowns across China Continue

The China-proxy Australian Dollar is muted against the Pound this morning as much of China remains in lockdown.

As Beijing remains wedded to its ‘zero-Covid’ policy, China – Australia’s largest trading partner – continues to hold many cities in lockdown.

Experts report that the lockdowns have had a profoundly negative effect on the country’s economic activities. Shanghai – home to China’s largest cargo port - has now been in lockdown since the beginning of April.

Economists are growing increasingly concerned about the potential knock-on impact on the global economy, with recession risks becoming more acute.

On the other hand, the ‘Aussie’ is drawing some support in light of recent hawkish comments from Reserve Bank of Australia (RBA) policymakers, which are fuelling RBA rate hike bets.

GBP/AUD Exchange Rate Forecast: Will Australian Retail Sales Boost GBP/AUD?

Looking ahead, the Pound Australian Dollar exchange rate is likely to be bolstered by Australia’s latest retail sales.

Sales growth is predicted to ease from 1.6% to 0.9% in April, potentially raising concerns that economic growth could falter as consumer spending weakens.

The Australian Dollar is also likely to remain sensitive to risk sentiment.

On the other hand, an absence of notable UK economic data could leave GBP exchange rates susceptible to UK political developments.

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