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The pound to Australian dollar exchange rate has come under added pressure following new Brexit developments, which are once again starting to impact on sterling exchange rates. Rates for GBP vs AUD had rallied higher since last Friday when US President Donald Trump delivered on his promise to impose additional tariffs on Chinese good coming into the US. The uncertainty has continued after China then imposed 60 billion worth of tariffs on US exports escalating the trade war further.

Overnight has seen the rift widen after China has reportedly said that they may not continue with these trade negotiations unless the US shows “sincerity”. Any developments in this spat are likely to see a reaction for the pound to Australian dollar exchange rate.

The Australian dollar also faces a further slide lower as the Reserve Bank of Australia (RBA) considers cutting interest rates. New Zealand have already cut interest rates this month signalling the mood in this part of the world for the commodity currencies. Concerns in the Australian economy and the recent weak retail sales data continue to point the RBA in the direction of cutting interest rates putting added pressure on the Australian dollar.

In the UK the Brexit debate is heating up ahead of European elections to be held 23rd May. Major volatility for sterling exchange rates is expected around this time with many voters expected to leave the two main parties for the Liberal Democrats, Change UK and the newly formed Brexit Party.

If there is a major shift towards the Brexit Party under Nigel Farage then this may be seen as a reaffirmation of the Leave vote and could help shape the direction of Brexit with a potentially cleaner Brexit to become possible, something that would be seen as negative for the sterling exchange rates. It should not be underestimated how much of a political stir these elections could cause which could see high currency volatility.

The fourth and final vote on the existing withdrawal agreement will be held in the first week of June. This event will likely see major volatility for GBP to AUD rates. The Prime Minister is expected to lose this vote and her departure from office is to be expected shortly after this date with Conservative MPs already preparing for a quick leadership contest. A change of leader will almost certainly have a bearing on the direction of Brexit and hence the strength of the pound.

 

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