Surprisingly Strong UK Data Supports Pound to Australian Dollar (GBP/AUD) Exchange Rate

Pound to Australian Dollar Exchange Rate Jittery as Market Risk-Sentiment Volatile 

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has seen mixed movement since markets opened this week. The Pound (GBP) has been left volatile by market uncertainty over the coronavirus and Brexit, limiting directional movement. 

Last week’s rise in market safe haven demand knocked the Australian Dollar (AUD) lower. GBP/AUD climbed from the interbank level of 1.81 to 1.82 throughout the week. 

However, the Australian Dollar has been one of the market’s most appealing risk-correlated currencies in recent months. As a result, investors have been hesitant to sell it too much. This has meant GBP/AUD is struggling to hold highs. 

Still, an overnight rebound in risk-sentiment is contending with a rebound in the Pound this morning. Both Sterling and the ‘Aussie’ are being boosted today. 

Pound (GBP) Exchange Rates Find Support as UK Job Stats Beat Forecasts 

Britain’s latest job market report was published today, and it surprised markets. 

April’s job stats beat forecasts in many key prints. An unexpected positive employment change figure of 6k rather than the expected –83k. Meanwhile, the key unemployment rate surprisingly didn’t shift. 

This is causing the Pound to rebound slightly from yesterday’s lows. 

However, some analysts are concerned that the data doesn’t paint the full picture.  

According to Neil Carberry, CEO at the Recruitment and Employment Confederation, said: 

‘The headline figures may not show it, but a lot has changed since April – with the claimant count rising to 2.8m , the unemployment rate is likely to be much higher than 3.9% now.’ 

Australian Dollar (AUD) Exchange Rates Find Support in Stimulus Hopes 

Risk-sentiment has been jittery in recent sessions. As the Australian Dollar (AUD) is a currency commonly correlated to market risk-sentiment, it has faced considerable volatility. 

Investors have been more anxious about a potential second wave of coronavirus infections. It emerged yesterday that there had been a new jump in infectious in Beijing. 

Fresh coronavirus fears hit risk-sentiment and left risk-correlated currencies like the Australian Dollar weaker. 

However, could the risk-off movement have been short-lived? Risk-correlated assets, including the ‘Aussie’, were up again today. 

Reports have emerged suggesting the US government could introduce a fresh fiscal stimulus package. This, as well as hopes for more action from the Federal Reserve, has bolstered hopes for economic resilience and has boosted risk-sentiment again. 

Pound to Australian Dollar (GBP/AUD) Exchange Rate Remains Sensitive to Coronavirus 

Both the Pound (GBP) and Australian Dollar (AUD) are seeing mixed performance this week. Both currencies are being boosted by domestic hopes, while the global coronavirus outlook is keeping investors anxious. 

So a close eye will remain on the coronavirus pandemic. Signs of a worsening second wave would hurt risk-sentiment, while signs that it is being handled well could have the opposite effect. 

In the event risk-sentiment is weakened, the Pound could benefit as the ‘Aussie’ falls. 

However, even in this situation the Pound’s potential for gains is limited. The Pound outlook is being weighed by no-deal Brexit fears, as well as Bank of England (BoE) uncertainty. 

In terms of news, Thursday’s Bank of England (BoE) policy decision is the next big event for the Pound to Australian Dollar (GBP/AUD) exchange rate. 

Josh Jeffery

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