Pound Australian (GBP/AUD) Exchange Rate Trades Sideways on Flat Market Mood and Absence of Data
(Updated 16:00, 25/10/21) The Pound Australian Dollar (GBP/AUD) exchange rate has traded sideways today, after dipping slightly this morning, as a lack of data leaves each currency without a clear direction. The pair is currently trading at AU$1.8377, having wavered between AU$1.8365 and AU$1.8388.
The market mood has also held steady throughout the day, keeping the risk-sensitive ‘Aussie’ rangebound. This has been seen in the equity markets: both the FTSE 100 and the European Stoxx 600 have hovered in a narrow range and are virtually unchanged since eight o’clock this morning.
The Pound (GBP) gained no support from a speech by Bank of England (BoE) rate-setter Silvana Tenreyro. Tenreyro said she wanted to wait until there was a clearer picture of the UK’s labour market, economic recovery and supply chain crisis before tightening policy:
‘Uncertainty over the effects of the furlough scheme should be resolved over the coming months, which should help paint a clearer picture of the position of the labour market…
‘The effects of supply chain disruption should also be temporary and unwind as supply of some goods increases, and as demand rotates back towards pre-COVID consumption patterns. The speed of this rotation is a key uncertainty, and will be related to the evolution of the pandemic around the world.’
While financial markets have priced in a rate hike as early as next month, which has boosted the Pound in recent days, the consensus among economists is that the BoE will likely raise interest rates in early 2022.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Falls on Riskier Trade and Lack of UK Data
The Pound Australian Dollar (GBP/AUD) exchange rate has softened today, as the riskier ‘Aussie’ catches bids amid an upbeat market mood. Meanwhile, a lack of UK data has left the Pound (GBP) muted.
The pair is currently trading at AU$1.838, down 0.1% from this session’s opening level of AU$1.84.
Australian Dollar (AUD) Edges Higher amid Risk-On Mood
The Australian Dollar (AUD) has firmed against the Pound this morning, as an improved market mood boosts the appeal of the risk-sensitive ‘Aussie’.
The increased appetite for risk comes following promising news from China Evergrande. The embattled property giant has triggered bouts of anxiety in global markets since last month, when it announced that it would be unable to meet a bond payment deadline.
However, on Friday the firm wired the missed $83.5m interest payment just as its 30-day grace period was about to end.
Reuters reports this morning that some bondholders have received the payment, while the company also announced over the weekend that it has restarted work on ten paused projects.
Shares in the company also jumped after Evergrande’s chairman indicated that the company would focus on its electric-vehicle unit in the future.
This news has cheered investors today, thereby boosting the riskier Australian Dollar.
Pound (GBP) Drifts amid Lack of Data
The Pound, meanwhile, is struggling for direction today amid a lack of UK economic data.
Additionally, following Friday’s mixed data, traders are starting to doubt whether the Bank of England (BoE) will hike rates at its next meeting.
UK retail sales fell for a record-breaking fifth month in a row, printing at -0.2% versus the 0.5% rise expected. Meanwhile, the UK’s PMIs beat forecasts, but manufacturing output slowed to near stagnation. These reports added to concerns that the UK’s economic recovery would be fragile to a rise in interest rates.
In addition, rising Covid cases are also worrying GBP investors. Some health leaders are calling on the government to introduce Plan B restrictions, which include working from home and mandatory mask-wearing.
With cases rising, analysts are concerned that higher infection rates will dent the UK’s service sector, which is currently driving the UK’s economic recovery, burdened by a struggling manufacturing industry. If cases lead to a fall in consumer spending, the UK’s rebound could stall.
These concerns have decreased the likelihood of a BoE rate hike in its November meeting next week, as the central bank may decide to wait and see how these issues play out. As such, the Pound has lost a key tailwind today.
GBP/AUD Exchange Rate Forecast: BoE Tenreyro Speech to Dent the Pound?
Looking ahead, a speech from BoE rate-setter Silvana Tenreyro could cause some movement in the GBP/AUD pair. Tenreyro is one of the more dovish members of the Monetary Policy Committee (MPC) and has advocated for a cautious approach in recent weeks. With the UK’s recent mixed data and rising Covid cases, any dovish comments from Tenreyro could have a bigger impact on Sterling than they have done previously.
Risk appetite is also likely to play a key part in GBP/AUD today. Should market sentiment sour, the Pound may regain some ground.