Pound Australian Dollar (GBP/AUD) Exchange Rate Strikes New Seven-Month Low On Growing Market Optimism

GBP/AUD Exchange Rate Slips as Upbeat Market Sentiment Bouy’s the ‘Aussie’

The Pound to Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning as rising market optimism has helped to bolster the ‘Aussie’ in early trade.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8415, down roughly 0.5% from this morning’s opening rate.

Australian Dollar (AUD) Rallies in Risk-On Trade

The Australian Dollar (AUD) is soaring this morning as an upbeat market mood helps to buoy the risk-sensitive currency.

This upbeat mood comes amidst a sense of relief following Donald Trump’s briefing on China last week, in which the President announced he would revoke Hong Kong’s privileged states for trade and travel, but stopped short of doing anything to threaten the phase-one trade deal.

Further bolstering sentiment are hopes the reopening of more countries and potential for a coronavirus vaccine will increase the chances of a V-shaped recovery in the global economy.

Marc Ostwald, chief economist and global strategist at ADM Investor Services International, suggests:

‘A new month begins with markets still riding on a wave of hope that lockdown easing will lead to a ‘strong’ recovery, an eternal hope of a vaccine being found, and more ‘stimulus’ (monetary & fiscal) measures, specifically from the European Central Bank this week.’

Pound (GBP) Stabilises as UK Factory Sector Begins Slow Road to Recovery

Meanwhile, the Pound (GBP) was able to rebound from its worst levels this morning, after the UK’s latest manufacturing PMI printed in line with expectations.

According to data published by IHS Markit, the UK’s manufacturing PMI came in at 40.7 last month, rebounding from 32.6.

While this still shows that UK factory activity continued to shrink last week, it suggests that the sector is now back on the road to recovery as lockdown restrictions are eased.

Rob Dobson, Director at IHS Markit, comments:

‘The rate of contraction has eased considerably since April, meaning – absent a resurgence of infections – the worst of the production downturn may be behind us. Pressure on manufacturers should ease further as lockdown restrictions are loosened, customers return to work and global activity restarts.’

GBP/AUD Exchange Rate Forecast: Brexit Woes to Dampen Sterling Sentiment?

Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate could face some headwinds in the coming days as UK and EU hold their latest round on Brexit talks.

These will be the final round of talks ahead of a key summit later on in the month in which both sides will assess the current progress toward a deal.

This could see Sterling sentiment sink as negotiations are likely to remain at a stalemate, with the UK government having previously threatened to walk away from talks in June if insufficient progress has been made.

Meanwhile, the focus for AUD investors will be on the Reserve Bank of Australia’s (RBA) latest policy meeting, where economists are expecting the RBA to leave its monetary policy untouched, with a slightly more upbeat tone from governor Philip Lowe potentially bolstering the appeal of the Australian Dollar.

Matthew Andrews

Contact Matthew Andrews