- Pound Australian Dollar Exchange Rate has Rally Potential – BOE Governor Carney set to speak later today.
- Wait-and-see Market Attitudes Afford Pound Little Quarter – Recovery is incredibly slow, as expected, as the UK starts to clean house.
- Chinese Yuan Slide Panics ‘Aussie’ Traders – PBOC have stated they are happy for the Yuan to reach near-record lows.
- Theresa May, Stephen Crabb and Michael Gove Announce Leadership Bids – Boris bows out.
The Pound Australian Dollar exchange rate has tended fairly narrowly since last week’s initial post-referendum slide.
Since the results were confirmed the Pound has seen massive depreciation across the board and posted its biggest single-day slide ever experienced. Pound value indexes have seen a 7% drop during the referendum and have seen only the barest of rebounds.
The uncertainty created by the Brexit result saw investors flock to safe-havens, driving the heavily risk-correlated Australian Dollar’s value south in the process. However the ‘Aussie’ has seen a welcome boost of late, seemingly thanks to investors balancing their portfolios before the end of the month. Although, today came the news that the People’s Bank of China intend to let the Yuan fall further, pulling down the ‘Aussie’ along with it.
The Pound Australian Dollar exchange rate currently trades at 1.8048, up almost 0.20% since the start of today’s session.
Pound (GBP) Starts Slow Recovery as British Political Turmoil Abates
Even as Sterling manages to reach some semblance of equilibrium after last week’s results, the currency still sits at woefully depreciated levels unseen since the Great Recession of 2008.
The Pound may start to benefit from a change in demeanour within the EU officials’ dealings with the UK as the Maltese Prime Minister claims the EU are ready to give Britain some breathing space as they navigate their departure.
Politically, the UK post-Brexit miasma appears to be clearing as we now have three confirmed candidates for the Tory leadership and, as some will be thankful to hear, Boris Johnson remains conspicuously absent for now.
Stephen Crabb, Michael Gove and now Theresa May have all announced plans to run for the top spot. This motley crew of potential leaders doesn’t appear to inspire confidence in the markets but the progress made has quelled the political uncertainty somewhat, stifling Pound volatility. However, Boris Johnson’s confirmation that he will not be making a leadership bid could cool uncertainty further as the world collectively sighs in relief.
‘Aussie’ (AUD) Depreciates as People’s Bank of China Allows Yuan to fall
The Australian Dollar has felt a significant amount of downward pressure today as the People Bank of China has made it clear that it intends to let the Yuan depreciate to around 6.80 per US Dollar.
This bodes terribly for the ‘Aussie’ as China is Australia’s largest trading partner. For example, if the Yuan is undervalued then the Chinese cannot afford to purchase as many imports from Australia as they are getting less for their money. Decreasing trade has a massive effect on an exporting nation such as Australia and could lead to stifled growth.
Previously the Australian Dollar was looking strong after the initial safe-haven surge subsided as investors moved towards re-diversifying their assets and away from the US Dollar. The Dollar’s previous strength worried the Federal Reserve enough that some analysts believe the Fed will elect to cut rates before the end of the year.
Forecasts Brighter for Pound Australian Dollar Exchange Rate as Policymakers get into Gear
The Bank of England’s Mark Carney is expected to give a speech in London today. There could be quite a bit of scope for movement depending on the governor’s tone, but chances are he will stick to a dovish reassuring of the markets that the world is, in fact, still in one piece. The financial and political fallout from the Brexit has only just begun to be felt so it’s expected that the governor will effect more of a wait-and-see rhetoric.
If the UK can rally behind a strong leader now that there are at least some options, the reassurance could see demand for the Pound increase.
The ‘Aussie’s’ China related slump could mean the Reserve Bank of Australia (RBA) will hold off cutting rates in an attempt to devalue the Australian Dollar next week. An overvalued AUD does not bode well for Australian trade so the central bank is keen to see it depreciate.
The Australian federal election is set to take place this Saturday, with the whole country voting to elect all 226 members of parliament. Such a radical restructuring could spell movement either way for the ‘Aussie’, however, both main parties lack a certain economic pedigree in the eyes of analysts.
The Pound Australian Dollar Exchange rate could be set to appreciate if AUD continues to feel the pressure from China and the sheer uncertainty of the Brexit begins to dissipate at a more favourable rate.
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