The GBP/AUD exchange rate is down slightly today as a returning risk-on mood supports the Australian Dollar, although stronger-than-expected UK manufacturing PMIs have helped limit Pound losses.
Last Week: ‘Aussie’ Fluctuates amid Shifting Risk Appetite
The Australian Dollar performed well through most of last week’s session as the risk-sensitive Australian currency benefited from improving market risk sentiment.
However, AUD exchange rates dipped sharply ahead of the weekend after market sentiment soured following anxiety worldwide over rising government bond yields, which in turn drove the ‘Aussie’ lower.
The Pound, meanwhile, surged at the start of the week after the UK’s plan to exit lockdown was announced, and optimism grows for a swift economic recovery.
Sterling then suffered towards the end of the session amid end of month profit taking but made solid gains against the Australian Dollar due to the risk-off mood that swept markets.
Three Things to Watch Out for This Week
- UK’s 2021 Budget
Wednesday will see Chancellor Rishi Sunak unveil the latest range of measures to help support UK’s economic recovery in the months ahead. Any further indications of economic uncertainty, however, would drag down Sterling.
- RBA Rate Statement
Tuesday will see the latest interest rate decision from the Reserve Bank of Australia (RBA), which is expected to hold at 0.1%. However, if the RBA strikes a notably dovish tone in its monetary policy statement, then we could see ‘Aussie’ suffer.
- Risk Sentiment
Global market mood will continue to drive the AUD/GBP exchange rate this week. As a result, we will could see the risk-sensitive Australian Dollar continue to rise if investors are encouraged by signs US fiscal stimulus will pass Congress and improving global coronavirus vaccination rollouts.
GBP/AUD Outlook
The Pound to Australian Dollar exchange rate could suffer this week if demand recovers for riskier assets as the outlook for the global economy improves. However, if Covid-19 infection rates continue to drop in the UK and the budget encourages GBP investors, then Sterling could head higher.