GBP AUD Exchange Rate Hits Two-Week High ahead of Key Fed Speech
The Pound (GBP) has risen notably against the Australian Dollar (AUD) today, thanks mainly to AUD deterioration.
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The GBP AUD climb to 1.6823 has been the best rate in two weeks, but still remains down from the high of 1.74841 seen in early June.
Pound Advances amid Northern Ireland Uncertainty
The Pound’s gains against the Australian Dollar come at a troubling time in the UK.
Monday brought some good news, when the Conservatives reached an agreement with the Democratic Unionist Party (DUP). For the price of £1bn, the Conservatives have effectively bought DUP support in Parliament.
More recently, however, concerns have been that the DUP may be unable to reach an agreement on power sharing with Sinn Fein. If both parties fail to govern together by Thursday, Northern Ireland may end up being subject to direct rule from Westminster.
Such an outcome could be politically disastrous and weaken the Pound, as it could stir up old animosities towards the London leadership.
In other UK news today, the Bank of England (BoE) has issued a financial stability report. This has broadly been a cautiously optimistic release, but there have been a few key takeaways.
On the positive side, the BoE has requested that other banks keep £11bn of capital in reserve, a figure already held by most institutions.
Of greater concern has been the report’s highlighting of the UK loans industry. While not warning of a late 2000’s financial crash, the bank has nonetheless raised the issue of rising borrowing during historically low UK interest rates.
If interest rates were to suddenly pick up, repayment costs would also rise, which could endanger consumers caught out by the change.
Australian Dollar Slips against Pound on Fed Fears
The Australian Dollar has dropped against the Pound today, owing to trader fears about the US Federal Reserve.
Ahead of a key speech by Fed official Janet Yellen, traders are unsure of what the policymaker’s tone will be.
If Yellen hints at another US interest rate hike in 2017 then the Australian Dollar could tumble, as it may mean another sharp and AUD-damaging US Dollar rise.
GBP AUD Forecast: Sterling Slump Forecast if Queen’s Speech is Voted Down
The next major UK event will be a two-parter, taking place over Wednesday and Thursday. This will be the vote on the Queen’s speech, which is necessary to ensure the Conservatives and DUP can put their policies into action.
Given how divisive and acrimonious the general election was, it is possible that all opposition parties will unite to vote down the speech. Such an outcome could trigger a Pound crash, as it would bring yet more uncertainty to the surface.
The coming Friday’s closing Australian data will be private sector credit stats for May. If figures rise on the month and year then the Australian Dollar could also appreciate against the Pound.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.6827 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5942.