Pound to Australian Dollar demand has worsened during Monday’s afternoon trading session, with GBP AUD dropping by -0.4% to 1.7396.
This deterioration follows an apparent policy reversal on the Conservative social care pledge, with the ‘introduction’ of a cap to the amount paid by those receiving care. While Theresa May painted the news as something included in the manifesto to begin with, opponents have labelled it a ‘U-turn’.
Regardless of intent, the news has shaken confidence in the Pound, triggering a second slump after initial concerns about the base social care plan.
(First published 11:06, May 22, 2017)
The Pound to Australian Dollar exchange rate has fallen by -0.3% today. Losses have been partly caused by election fears.
The Conservatives unveiled their 2017 manifesto election on May 18th; since then the Tories have fallen in some opinion polls.
From a lead of around 49% on May 17th, the YouGov election poll has shown a dip to 44%. Additionally, Survation estimates a drop to 43%. These figures still leave the Conservatives ahead of Labour, who have polled around 34-35% after the Tory manifesto reveal.
Despite the predicted lead, the dip in polling points still raises serious questions about how Conservative policies will affect their election performance.
The latest focus has been on the so-called ‘dementia tax’, which is the opposition label for Tory social care plans. Under the scheme, house prices are factored into the social care costs for an individual.
Given the eye-watering costs of housing across the country, this new system would target a significant portion of the home-owning elderly and may cost the Conservatives the ‘grey vote’.
If it looks like the Conservative lead is narrowing further before the June 8th election then the Pound could weaken. This is because a smaller Conservative majority could lead to a weaker voice in Brexit debates, which may also raise the chances of a calamitous ‘Hard Brexit’.
Former-Chancellor George Osborne has recently forecast a ‘U-turn…on social care’. If this prediction is accurate then the Conservatives could gain ground in the polls and improve GBP AUD trading.
Future Australian Dollar demand could be influenced by the Chinese economy.
China is Australia’s biggest trade partner, but the relationship is a two-way street – Chinese economic weakness can negatively impact the Australian economy.
According to ABC News Business Editor Ian Verrender, a Chinese slowdown could damage the Australian economy;
‘More than 35% of [Australian] export trade is with China, the bulk of it in iron ore, leaving us horribly exposed to any [troubles] in the Chinese economy. More [economic] stimulus may deliver us a reprieve, but it merely is delaying the inevitable and, at some stage, our over-reliance on China will come back to bite us’.
Continued Chinese economic weakness could negatively impact the Australian Dollar, causing a gradual decline 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 down at 1.7413 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading up at 0.5741.
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