The British pound is higher against the Australian dollar on Thursday afternoon after a dramatic UK government cabinet reshuffle saw new Prime Minister Boris Johnson stamp his control over the Treasury in a bid to increase government spending.
GBP/AUD was up by 100 pips (+0.52%) to 1.9334 with a daily price range of 1.923 to 1.938 as of 2.30pm GMT. The daily surge takes the currency pair back up to the top of its five-day price range, giving it a weekly return of just +0.12%.
The GBP high as Sunak replaces Javid
The exit of Sajid Javid from Number 11 Downing Street, the official residence of the UK Chancellor saw the pound reach new weekly highs against the Aussie and a five-day high against the US dollar. The change comes just before the first budget (scheduled for March 11) of the new conservative government, which is conducted by the Treasury.
Javid’s replacement Richi Sunak was chief secretary to the Treasury. Sunak has been the Conservative MP for Richmond in Yorkshire since 2015. He is an Oxford University Graduate and Alumni of investment bank Goldman Sachs. Although he is relatively young for such an important position in government, he has a top CV with a history in investment banking that is being heralded in financial markets. The conclusion is that Sunak is more likely to agree to the kind of spending plans that are suited to Prime Minister Boris Johnson’s “levelling up” agenda to raise living standards outside of London and the South East.
The AUD down as coronavirus cases increase
The Aussie dollar was under pressure on the news that the number of cases of the coronavirus markedly increased by Thursday but pulled of its daily lows as risk sentiment improved. Chinese authorities changed the method of diagnosis of the virus after the top Communist party official in Hubei Province was fired for mishandling the crisis. The new methodology, which included the use of CT scan results meant the number of cases reported jumped dramatically. Hopes that the spike in the number of cases is a one-off helped calm markets, lifting the Aussie.