Pound Australian Dollar Exchange Rate Sheds Weekly Advance Attempts
Since markets opened this week, the Pound Australian Dollar (GBP/AUD) has seen broadly mixed movement. Sterling (GBP) remains appealing on UK recovery hopes, but market sentiment improved last night leading to a jump in Australian Dollar (AUD) demand.
After opening this week at the interbank level of 1.80, GBP/AUD has been jittery and volatile. The pair briefly touched on a high of 1.81 early in the week, close to late-February’s best levels in around a quarter.
GBP/AUD has since tumbled though. Since last night, GBP/AUD is falling again and at the time of writing is trending in the interbank region of 1.79 – its worst levels since last week.
Amid a lack of fresh drive in the Pound, investors are now awaiting tomorrow’s slew of key UK ecostats.
Pound (GBP) Exchange Rates Calm and Fail to Capitalise on Risk-On
The Pound has been one of the most appealing major currencies for many weeks now. It has seen a long period of surges on speculation that Britain’s economy will be one of the first major economies to recover from the coronavirus pandemic.
This optimism has been the primary driver of recent Pound strength. However, its rally has been running out of steam lately as the British currency lacks fresh impetus to continue its advances.
While Sterling has been considered a fairly risk-correlated currency lately, its recent rally has ignored risk-sentiment. With risk-sentiment rising again, the Pound still lacks the drive to extend its gains.
This is making it easier for the more risk-correlated Australian Dollar to advance today.
Australian Dollar (AUD) Exchange Rates Boosted by US Optimism
The Australian Dollar is a relatively risky trade-correlated currency. It is often more appealing when markets are more optimistic and willing to take risks.
As a result, the currency has benefitted strongly from the rise in demand for risks seen since last night. US inflation rate data showed less of an inflation rise than some bulls expected, which doused any speculation for a more hawkish Federal Reserve.
The safe haven US Dollar (USD) tumbled on the news and the Australian Dollar was left broadly appealing.
Market optimism and AUD were also boosted by news that a huge US fiscal stimulus package had finally been passed. According to David Madden from CMC Markets:
‘Several hours after the end of European trading, it was announced that Congress backed the $1.9 trillion stimulus plan so it will be passed over to President Biden to sign off. The Dow Jones hit another record high, it closed above 32,000, following the announcement of the relief package.
The bullish sentiment from the US pushed up equity markets in the Far East,’
Pound Australian Dollar (GBP/AUD) Exchange Rate Awaits Friday’s Slew of Data
For now, investors seem to be pausing on the Pound’s recent rally. However, Sterling could see a fresh advance on Friday if upcoming UK data impresses investors.
Friday will see the publication of this week’s most influential UK ecostats. UK trade balance, manufacturing production, industrial production and growth rate data could be highly influential to the Pound outlook.
Strong UK data could boost hopes for UK economic resilience amid coronavirus pandemic lockdowns. This could make investors even more hopeful about the momentum of Britain’s recovery and further support Sterling’s rally.
However, weaker than expected UK data could have the opposite effect and may even weigh on the Pound’s recent appeal.
As for the Australian Dollar, it will continue to be driven largely by shifts in market sentiment.
If investors remain optimistic about global recovery but Federal Reserve rate hike bets remain low, markets are more likely to keep favouring risk-correlated currencies. This could mean the Pound Australian Dollar (GBP/AUD) remains under pressure going forward.