The AUD GBP exchange rate is edging lower after striking a seven-and-a-half-week high following the results of the UK general election.
With all-but one seat having declared its results in the UK general election, the UK is faced with the reality that it has voted in a hung parliament, with the Conservative Party falling eight seats short of a majority.
Considering the expectations on the markets had largely been that Theresa May would secure a landslide victory once polling had closed, the bullishness of the Australian Dollar during last night’s Asian session is hardly surprising.
The Australian Dollar had been able to surge, but profit-taking on the ‘Aussie’ and news that the Conservatives may be able to form a deal to remain in power pushing up the Pound has weakened AUD GBP.
While the Australian Dollar Pound Sterling exchange rate is sinking -0.2%, this is a misleading figure considering overnight Sterling had slumped to a seven-and-a-half-week low of 1.67 and continues to remain over two cents weaker than yesterday’s close.
GBP has found a modicum of support after Theresa May was able to strike a deal with the Democratic Unionist Party (DUP), which gives her a knife-edge majority in the House of Commons.
According to Royal Bank of Canada; ‘If the numbers do allow the Conservatives to form a coalition with the DUP then things could be fairly stable. If not there could be a lot of inertia as it isn’t easy to see how else the Conservatives would be able to form a stable coalition to drive things forward.’
The Prime Minister is refusing to resign, despite many claiming that calling the election was a disastrous move, as was the campaign which she fought.
Her intention had been to return to government with a strong majority – with some confident that the Tories would gain an additional 100 seats or more – so to have weakened her grip on power and her mandate to implement Brexit is a huge embarrassment.
Both Labour Shadow Chancellor John McDonnell and Citigroup Global Chief Economist Willem Buiter have called Theresa May a ‘lame duck’ Prime Minister.
There is no domestic data set for release that could move the Australian Dollar today, with no high-profile US releases that could potentially alter demand for the risky ‘Aussie’.
This means that the fallout from the UK election and all the developments it will bring with it will be in control of AUD GBP exchange rate movement.