The Pound to Australian Dollar exchange rate has dropped sharply today, owing to low confidence in UK government stability.
On the other side, the Australian Dollar has advanced but also remains vulnerable to political upsets.
Is Pound-Damaging Vote of No Confidence Incoming?
The Pound has tumbled against the Australian Dollar today and could face further losses ahead, depending on UK political developments.
The latest GBP losses are down to political uncertainty, mainly centring on a possible challenge to Theresa May’s leadership.
May has come under fire recently because of a series of government scandals, including the resignation of Michael Fallon as Defence Secretary.
Other issues have included Priti Patel losing her job and Boris Johnson coming under fire because of ill-judged remarks about a British-Iranian national held in Iran.
As a sign of mounting pressure on the PM, it has been reported that around 40 Conservative ministers have agreed to a vote of no confidence against Theresa May.
Offering a scathing evaluation of the situation has been Kit Juckes, Macro Strategist at Societe Generale;
‘Sterling is priced for soggy growth and difficult negotiations. Both are likely whoever runs the Conservatives. The weakness of the PM’s position, like the incompetence of Mr Bean, is well known.
That’s before we wonder who would want her job in the current circumstances; and before we wonder what her departure might do to the odds of another election, which might well put Jeremy Corbyn into Downing Street.
And would that be good for [the Pound] or bad?’.
If the Conservatives suffer any further setbacks or public embarrassments, the Pound could fall even further against the Australian Dollar.
Australian Dollar could Face Difficulties on Citizenship Concerns
The Australian Dollar has risen by 0.7% against the Pound recently, but may face difficulties in the coming weeks.
Problems might materialise on issues of citizenship among Australian politicians, something that has already unseated Deputy Prime Minister Barnaby Joyce.
The citizenship scandal has revolved around MPs being elected while holding dual-citizenship status, which is illegal under the Australian constitution.
With Joyce being forced out of office because of his prior dual-citizen status, this has deprived the Australian government of its single MP majority.
Having renounced the New Zealand half of his citizenship, Joyce has since run to be re-elected.
If he fails to reclaim his seat and is instead replaced with an opposition MP, then this could throw the Australian government into disarray and weaken the Australian Dollar.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.7114 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5841.