The GBP AUD exchange rate has dipped this week despite a brief increase in demand for the Pound. Investor appetite for the Australian Dollar has risen as the Reserve Bank of Australia (RBA) took an optimistic tone and recent Chinese data is solid.
The Pound to Australian Dollar exchange rate started this week trading at the level of 1.7321 and briefly hit a low of 1.7211 on Monday. The pair has trended between those levels since then.
Pound (GBP) Outlook Dependent on Election Outcome
It’s easy to see why investors largely overlooked Monday’s UK services PMI from Markit. While typically an influential report, traders weren’t notably fazed by the disappointing result of 53.8 as they had an optimistic UK election poll to react to.
A poll published by ICM and The Guardian on Monday showed the Conservatives with a strong 11-point lead over the opposition party, Labour. As markets favour a Conservative majority win, this bolstered the Pound.
Investors are hoping for a Conservative majority as the party has argued it will have more power to negotiate Brexit with a strong mandate. This is why the long-term Pound outlook would improve in the event of a majority win for the Tories.
However, it’s worth noting that there are still other polls showing a tight race between the Conservatives and Labour. Another new poll from Survation on Monday night put the Conservatives just one point ahead of Labour, the second poll this week to do so.
The big difference in polls is due to different methodologies employed by pollsters this year, in attempt to find the most accurate method following poor polling accuracy in recent years.
For now, investors appear to be reassured by betting markets, which largely bet on a majority win for the Conservatives.
If the Tories perform worse than expected, leading to a ‘hung parliament’, Sterling is likely to plummet as uncertainty rises about the capability of a minority government in Brexit negotiations.
Australian Dollar (AUD) Outlook Optimistic after RBA News
While the Reserve Bank of Australia (RBA) wasn’t exactly hawkish in its June policy decision during Tuesday’s Asian session, it was optimistic enough to make investors a little hungrier for the Australian Dollar.
As expected, the RBA left Australian monetary policy frozen. Amid rising speculation that the RBA could be preparing another interest rate cut in the foreseeable future the ‘Aussie’ had seen poor performance recently.
However, the bank’s generally optimistic tone on Australian growth was enough to offset rate cut speculation slightly, giving markets a bit more appetite for the ‘Aussie’.
The RBA continues to project that Australia’s Gross Domestic Product (GDP) growth will be slightly over 3% over the next two years or so, despite expectations among officials that Australia’s economy saw a slower performance in Q1 2017.
Most analysts forecast Australia’s Q1 GDP will come in at around 0.2% when it’s published in Wednesday’s Asian session.
The RBA’s optimism could give the ‘Aussie’ a little long-term support even if GDP contracted slightly in Q1, though this would still disappoint investors in the shorter term.
GBP AUD Interbank Rate
At the time of writing this article, the GBP AUD exchange rate trended in the region of 1.7270. The Australian Dollar to Pound exchange rate traded at around 0.5788.
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