Australian Dollar Pound Strikes Six-Week High as UK Election Results in Hung Parliament
The Australian Dollar to Pound (AUD GBP) exchange rate surged during trade on Friday as investor reacted to the outcome of the UK general election.
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Pound (GBP) Nosedives on Political Uncertainty
The Pound plummeted during the Asian session as exit polls suggested that the vote would lead to a hung parliament, with Sterling continuing to slide as trading continued as it became clear that the Conservatives would fail to secure a majority.
Investors fled Sterling as they fear that a weaker government will frustrate the Brexit process, with Theresa May’s plans for a hard Brexit likely to be undermined if she is forced to cut deals with other parties, while a lack of a mandate granted by the British public is also likely to impact her ability to effectively negotiate with the EU.
Mark Haefele, global chief investment officer at UBS said;
‘The unexpected outcome increases the threat of further volatility for sterling and UK assets. The result is likely to call the position of the Prime Minister into question, the government is likely to be relatively weak, and the result further complicates the upcoming Brexit negotiations, due to start on June 19.’
However the Pound was able to recoup some of its losses before the end of Friday as it was announced that Theresa May would seek to form a new government with the support of the DUP, granting her a narrow majority in which to work with.
AUD GBP Forecast: Pound to Remain Volatile as Government is Formed?
The AUD GBP exchange rate is likely to continue to push higher over the coming days even if Theresa May is able to form a new government as investors remain uncertain if the PM will be able to hold her party together.
Many observers speculate that she is likely to come under increasing pressure to resign over her decision to call an early election which saw the Tories lose their majority something that would cast further political uncertainty and weaken the Pound.
Meanwhile the Australian Dollar may cede some ground at the start of next week as the latest domestic Business Confidence survey is expected to show a dip in sentiment following concerns over Australian economic growth.
Current Interbank Exchange Rates
At the time of writing the AUD GBP exchange rate was trending around 0.58 and the GBP AUD exchange rate was trending around 1.69