GBP/AUD Exchange Rate Extends Losses as Risk-On Mood Fails to Raise Pound
(Updated 16:50, 22/9/21) The Pound (GBP) fell further throughout the afternoon today as a lack of data extended downside pressure. A risk-on mood failed to boost Sterling, as sufficient headwinds remained to suppress trading sentiment.
Investors are bearish ahead of the Federal Reserve’s tapering announcement this evening, as economists report mixed views over whether the central bank will expand on its tapering forecast. Representatives from TDS Bank remark that ‘officials will likely signal that they are almost ready to taper’, whereas the Danske Bank ‘expect[s] the Fed will refrain from providing more details.’
At August’s meeting, Fed Chair Jerome Powell indicated that a ‘Septaper’ is off the agenda, citing the spread of the Delta Covid-19 variant as a critical factor.
Volatile USD sentiment has a knock-on effect when it comes to ‘Greenback’s peers, as uncertainty draws traders away from riskier assets. As the market remains focused upon the Fed, GBP has little chance of recouping its earlier losses.
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Pound Australian Dollar Exchange Rate Sinks, Pound Pressured by Trade Comments
The Pound Australian Dollar (GBP/AUD) exchange rate is steadily falling as optimism over restriction easing boosts AUD, while the Pound (GBP) remains subdued on trade concerns.
At the time of writing, GBP/AUD is trading at A$1.8829, down 0.4% on today’s opening levels.
Australian Dollar (AUD) Firms on Border Comments
The Australian Dollar (AUD) has risen against the majority of its peers today as an optimistic outlook from Australia’s Tourism Minister bolsters AUD sentiment. Dan Tehan told reporters at a National Press Conference that Australia plans to open its international border by Christmas at the latest.
Tehan remarked: ‘People will be able to freely travel outside Australia with no restrictions under the national plan governing the country’s emergence from COVID-19… The government is exploring opening travel bubbles with several countries to reduce quarantine time.’
Such an optimistic outlook has boosted sentiment despite anti-lockdown protests and rising case numbers in some parts of Australia. The number of Covid infections increased earlier this week across the states of Victoria, Queensland, Western Australia and the Northern Territories.
Australian trading sentiment is also encouraged by an overall risk-on mood across the market. Chinese real-estate giant Evergrande has promised to pay some of its debt, alleviating investors’ concerns that the company may be having a ‘Lehman moment’.
Relative confidence ahead of the Federal Reserve conference this evening is also supporting risk sentiment.
Pound (GBP) Slides on Downbeat Trade Comments
The Pound is trading down against the majority of its peers this morning as UK Prime Minister Boris Johnson remarks that a free trade agreement between the US and the UK is unlikely to materialize before the next general election in 2024.
Johnson was evasive when asked whether he may or may not get a trade deal with America finalised by the time his term comes to an end, saying simply that ‘we’re going to go as fast as we can.’ He emphasised that ‘a good [Free Trade Agreement]’ was more important than ‘a quick deal’.
Back in 2016, in the run up to the Brexit referendum, then-US President Barack Obama said that Britain would be at the ‘back of the queue’ for a trade deal if it voted to leave the EU. Earlier this week, Johnson acknowledged these comments ahead of a White House meeting in the US.
Given the perceived lack of support for an imminent trade deal between the UK and the US, government ministers are considering alternatives, such as joining the existing free trade agreement between the US, Mexico and Canada – known as the USMCA.
The UK is also bidding to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a free trade agreement between Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.
Uncertainty over the future of international trade has subdued UK trading sentiment despite a risk-on mood, which generally lends support to the Pound.
Pound Australian Dollar Exchange Rate Forecast: BoE Decision in the Spotlight
The Bank of England (BoE)’s interest rate decision tomorrow will likely be the main driver of movement for GBP/AUD. Central bank policymakers may strike a hawkish tone, given last week’s high inflation: if this is the case, GBP sentiment is likely to firm.
Earlier in the session, Australian PMI data is expected to print lower than last month for manufacturing, while rising for services. Mixed data could dent AUD trading, lending upside support to the Pound Australian Dollar exchange rate.