Australian Dollar Pound Exchange Rate Surges Higher as UK Polls Tighten
In the wake of the latest Reserve Bank of Australia (RBA) policy meeting the Australian Dollar was encouraged to trend higher against many of the majors.
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While the first quarter Australian trade deficit failed to narrow as far as forecast it was not long before the ‘Aussie’ bounced back, with the figure still an improvement on the previous quarter.
Even so, the tone of the latest comments from the RBA proved decidedly neutral in outlook, boosting the antipodean currency as the odds of a fresh interest rate cut remained limited.
Although confidence in the health of the Australian economy remains somewhat muted this was enough to shore up the Australian Dollar Pound exchange rate on Tuesday, particularly as market risk appetite also picked up.
However, the ‘Aussie’ is unlikely to hold onto its stronger footing for long as forecasts point towards a sharp loss of momentum in the first quarter gross domestic product report.
As analysts at Nomura noted:
‘This should reflect, in part, some payback from the very strong Q4 result which was boosted by a likely unsustainable surge in public spending and private consumption. Partial data also suggest a relatively modest contribution to growth from consumer spending in Q1, a decline in dwelling investment and a drag from net exports.’
Any upside surprise, however, could encourage the Australian Dollar to extend its bullish run further.
Election Uncertainty Forecast to Keep Pound Under Pressure
Demand for the Pound, meanwhile, weakened as election jitters continued to weigh on the minds of investors.
Continued tightness in the opinion polls has kept the possibility of a hung parliament alive, even though markets are still betting that the Conservatives will return to power with an increased majority.
Coupled with a disappointing BRC like-for-like sales figure, which showed a fresh contraction in May, this left Sterling lacking in any particular support.
The AUD GBP exchange rate is likely to experience further volatility ahead of the results of the snap general election, especially once the polls close.
If the Conservatives fail to secure a majority the Pound could extend its slump ahead of the weekend, with any heightened sense of political uncertainty likely to increase market anxiety over upcoming Brexit negotiations.
Additional signs of economic weakness from the latest raft of UK production and trade data could also weigh heavily on GBP exchange rates, with the economy already showing signs of slowing since the start of the year.
At the time of writing, the Australian Dollar Pound exchange rate was trending higher in the region of 0.5830. Meanwhile, the Pound Australian Dollar exchange rate was slumped around 1.7147.