Pound Australian Dollar (GBP/AUD) Exchange Rate Firms following US Data
(Updated 17:00, 6/8/21) The Pound Australian Dollar (GBP/AUD) exchange rate recouped its losses this afternoon, in a shift seemingly triggered by the US non-farms payrolls report, which printed above forecasts and caused the US Dollar (USD) to jump.
As currency traders flocked to the ‘Greenback’, GBP managed to hold its appeal thanks to the Bank of England’s (BoE) hawkish monetary policy summary yesterday.
The Australian Dollar (AUD), on the other hand, failed to keep investors’ interest, due to Australia’s ongoing coronavirus crisis.
As a result, GBP/AUD managed to regain this morning’s losses.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Weakens
The Pound Australian Dollar (GBP/AUD) exchange rate is trending lower this morning as a lack of UK sees Sterling lose its overnight gains.
The pair is currently trading at around AU$1.8795, down from overnight highs of AU$1.8854, with the ‘Aussie’ supported by cautious optimism from the Reserve Bank of Australia (RBA).
Pound (GBP) Adrift amid Lack of Data
The Pound (GBP) made some modest gains against the Australian Dollar (AUD) yesterday, following mixed messages from the Bank of England (BoE).
The (BoE) kept its interest rate and quantitative easing unchanged, but raised its inflation forecast to 4%.
The bank also said that ‘some modest tightening of monetary policy’ may be necessary to keep inflationary pressures in check. These comments suggest that the bank may tighten policy sooner than expected, but any measures taken would likely be ‘modest’.
As such, the BoE decision has failed to provide GBP with a tailwind today, while a lack of notable UK data is also causing the Pound to seem somewhat adrift.
In addition, small rises in UK Covid cases over the last two days may begin to chip away at the Covid optimism that has underpinned the Pound in recent weeks.
Australian Dollar (AUD) Bounces Back from Poor PMI
The Australian Dollar is gaining on the Pound today, recovering after it dipped overnight due to a poor services PMI.
The Ai Group Services Index for July printed at 51.7, down from 57.8 and well below forecasts of 58. The drop was caused by regional lockdowns that hampered, and continue to hamper, service-sector activity in some of Australia’s major cities.
This initially caused AUD to dip, but it managed to regain its losses as the global market mood remains relatively upbeat.
The upside in AUD was also supported by recent communications from the RBA, which sounded a note of cautious optimism. In the RBA’s Statement of Monetary Policy, the central bank said that the country’s economic recovery had been better than predicted and that, despite recent coronavirus disruption, ‘the outlook is a little stronger than expected at the time of the previous Statement.’
This comes three days after the RBA decided to go ahead with tapering bond purchases, which boosted the ‘Aussie’.
While the RBA’s statement seems to be supporting the ‘Aussie’, the upside is likely limited by Australia’s ongoing coronavirus crisis.
GBP/AUD Exchange Rate Forecast: Risk Appetite Could Turn the Tables
Risk appetite could play a big part in GBP/AUD this afternoon, with stock markets down and Covid cases up. If market sentiment sours, GBP/AUD could start to climb.
Coronavirus developments could influence both the ‘Aussie’ and Sterling this afternoon and in the weeks to come. Hopefully the modest rise in UK cases is just a bump in the road, but if confirmed cases keep growing then the Pound could suffer.
Meanwhile, Australia is still using lockdowns to battle outbreaks as most of the population remain unvaccinated. If the country struggles to get cases under control, this could dent AUD.