Pound Australian Dollar (GBP/AUD) Exchange Rate Stages Modest Recovery on BoE Expectations

GBP/AUD Exchange Rate Buoyed by BoE Rate Hike Speculation

(Updated 14:50 12/10/2021) The Pound Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this afternoon, with the pairing having clawed back some this morning’s initial losses.

This modest rebound in Sterling appears to have been primarily attributed to rising expectations that the Bank of England (BoE) will hike interest rates in the near-term, with some GBP investors starting to price in a hike as soon as December, in the wake of some hawkish signals from the bank over the weekend.

Meanwhile, the Australian Dollar has been forced to relinquish some ground as renewed demand for the US Dollar (USD) has weakened the appeal of the risk-sensitive ‘Aussie’.

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Pound Australian Dollar Exchange Rate Weakens on Brexit Concerns

The Pound Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning as concerns over renewed Brexit tensions, saps Sterling sentiment.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8458, down roughly 0.2% from today’s opening rate.

Pound (GBP) Falters amidst Renewed Brexit Uncertainty

The Pound (GBP) is trading on the back foot against the Australian Dollar (AUD) this morning, as the threat of a new row between the UK and EU over the Northern Ireland protocol unnerves GBP investors.

This comes ahead of a speech by UK Brexit minister, David Frost later today, in which he is expected to dismiss a series of proposals expected to be offered by the EU on Wednesday, as not going far enough.

GBP investors fear Frost’s speech could seriously undermine UK-EU relations, with Irish foreign minister Simon Coveney warning that the EU is close to reaching the point at which it will say ‘enough, we cannot compromise any more’.

These concern have offset the publication of the UK’s latest jobs report earlier this morning, with August’s figures having potentially offered some support to the Pound Australian Dollar exchange rate, after reporting domestic unemployment fell to a one-year low.

Australian Dollar (AUD) Buoyed by Jump in Business Confidence

Meanwhile, the Australian Dollar (AUD) is firming this morning, following the publication of Australia’s latest business confidence index.

National Australia Bank reported a sharp improvement in business morale last month, with the confidence index jumping from -6 to 13.

However, while the confidence index points to a more optimistic outlook, the current conditions index indicates that the situation on the ground is a little less rosy, something which is likely to have tempered the Australian Dollar’s gains this morning.

Alan Oster, chief economist at NAB, comments:

‘Confidence generally reflects hope rather than reality. Current business conditions deteriorated significantly across all states, particularly New South Wales and Victoria, as lockdowns and disruptions continued to weigh on activity.’

This comes following prolonged lockdowns in some parts of the country, which have limited economic activity and are expected to result in a contraction of GDP in the third quarter.

Pound Australian Dollar Forecast: Robust UK GDP Release to Buoy Sterling?

Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate may strengthen on Wednesday, with the publication of the UK’s latest GDP figures.

August’s release is forecast to report UK economic growth accelerated to 0.5% month-on-month, as the full reopening of the economy bolstered activity.

However there is still room for disappointment, with staff shortages and supply constraints possibly limiting growth, and capping the upside potential of Sterling tomorrow.

Meanwhile, the spotlight for AUD investors in the latter half of this week will be on the publication of Australia’s own jobs report.

This could see the ‘Aussie’ come under pressure as economists predict that the lockdowns in Sydney and New South Wales will have resulted in domestic unemployment rising for the first time in a year.