GBP/AUD Exchange Rate Edges Higher as Boris Johnson is Announced New UK PMI
The Pound Australian Dollar (GBP/AUD) exchange rate edged higher today, leaving the pairing trading around $1.773 on the interbank market.
The Pound (GBP) rose against the Australian Dollar (AUD) today following the announcement that Boris Johnson, the former Foreign Secretary and London mayor, would succeed Prime Minister Theresa May.
Mr Johnson said in his speech following his nomination:
‘Today, at this pivotal moment in our history, we again have to reconcile two noble sets of instincts – between the deep desire for friendship and free trade and mutual support and security and defence between Britain and our European partners; and the simultaneous desire, equally heartfelt, for democratic self-government in this country.’
Sterling traders have become increasingly jittery, however, as Mr Johnson is a known Brexiter, previously promising that the UK would leave the European Union on 31 October, ‘do or die’.
Meanwhile, the Bank of England’s Chief Economist, Andy Haldane, commented today that he was ‘very cautious’ about the central bank cutting interest rates unless there is a sharp downswing in the UK’s economy.
‘With the economic road ahead potentially forking, the case for holding rates until the road becomes clearer is strong.’
GBP/AUD Exchange Rate Eases despite Renewed US-China Trade Talk Hopes
The Australian Dollar (AUD) benefited from signs of renewing US-China trade discussions today.
This came following US Treasury Secretary Steven Mnuchin’s comments last week that the US trade envoys would meet in person to continue trade.
IGN also reported:
‘Reports of the U.S. and China resuming trade negotiations next week are positive for risk sentiment, but escalating tensions in the Middle East pushing oil higher are negative.’
As Australia’s economy so closely tied to that of China’s, this has provided some uplift for the risk-averse ‘Aussie’.
Yesterday also saw Reserve Bank of Australia’s Assistant Governor, Christopher Kent, say that the bank would only adjust its monetary policy to meet its targets.
Mr Kent’s cautious has been perceived as lessening the chances of an aggressive rate cut from the central bank next week.
GBP/AUD Outlook: Brexit Developments in Focus
Sterling traders will be paying close attention to Brexit developments following the announcement of Boris Johnson as the new Prime Minister.
Any further indications of possible tensions emerging between the EU and the UK over Mr Johnson’s known hard stance of Brexit could weaken the Pound.
‘Aussie’ investors, meanwhile, will remain fixated on global political developments for most of this week, with US-China trade talks remaining in focus.
The GBP/AUD exchange rate could likely weaken this week as Brexit jitters are likely to return surrounding Boris Johnson’s premier.