GBP/AUD Exchange Rate Jumps as Australia is Engulfed in Political Chaos
The Pound Australian Dollar (GBP/AUD) exchange rate is surging this morning, amid rising political tensions in Australia.
At the time of writing the GBP/AUD exchange rate is currently down around 0.4% this morning, extending the pairing’s losses to over 2 cents so far this week.
Will Political Turmoil Drive the Australian Dollar (AUD) to New Lows?
The Australian Dollar (AUD) is facing considerable headwinds this week, being meet by heavy selling in the wake of Peter Dutton’s challenge for leadership of the ruling Liberal party.
While Prime Minister Malcolm Turnbull narrowly survived this leadership challenge at the start of the week, markets are bracing for the possibility of a second challenge in the near future.
This comes after three of Turnball’s key supporters within his cabinet resigned overnight on Wednesday, something which observers suggest may serve as the death knell for Turnball’s leadership.
Political upheaval is not uncommon in Australia, with no Prime Minister having completed a full three-year term since 2007, something which often leads to the Australian Dollar ignoring the machinations of Canberra.
However this appears not to be the case this time, according to Westpac senior currency strategist Sean Callow who said:
‘The trading history of the Aussie dollar in the last 25 years or more suggests that it is not sensitive to who is in The Lodge
‘However since the Liberal leadership spill on Tuesday, the AUD is easily the weakest G-10 currency – despite strong Q2 construction data on Wednesday – which suggests that this is a rare instance of the Aussie carrying a small political risk premium.’
It remains to be seen how long this downtrend will persist however, with most analysts predicting that the political chaos is unlikely to have a ‘sustained impact’ on the ‘Aussie’.
GBP/AUD Exchange Rate Forecast: Brexit and Trade Concerns to Drive Momentum?
Looking ahead a lull in any notable data over the next couple of weeks is likely to see movement in the Pound Australian Dollar (GBP/AUD) exchange rate continue to be driven by political and trade concerns.
In terms of Sterling the currency is likely to be driven by ongoing Brexit negotiations, with GBP likely to weaken unless some substantial progress in talks begins to emerge soon.
Meanwhile looking past the current chaos in Canberra, the Australian Dollar is likely to see some volatility in the face on the US-China trade dispute, with further losses expected if tensions continue to escalate.
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