Pound Australian Dollar Exchange Rate Subdued amidst GBP Profit Taking

Pound Australian Dollar (GBP/AUD) Exchange Rate Dips as Investors Book Gains 

The Pound Australian Dollar (GBP/AUD) exchange rate is ticking lower this morning, as Sterling appears to be suffering from a bout of profit taking. 

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8524, having fallen slightly from this morning’s opening levels. 

Pound (GBP) Relinquishes Some Post-CPI Gains 

The Pound (GBP) is trading with modest losses against the Australian Dollar (AUD) and the majority of its other peers so far this morning. 

This dip in Sterling appears primarily driven by some profit taking, with GBP investors seeking to lock in their gains following the Pound’s recent surge

GBP exchange rates trended steadily higher through the first half of this week, as stronger-than-expected domestic employment and inflation prints have reignited expectations the Bank of England (BoE) will hike interest rates by the end of the year. 

According to CME Group’s BoEWatch tool, the current odds of the Monetary Policy Committee (MPC) voting to raise interest rates by 0.2 basis points in December are above 67%. 

iles Coghlan, chief analyst at HYCM, comments: 

‘[Yesterday’s] CPI reading for October at 4.2%, coupled with strong employment data, will likely be the tipping point for the BoE. 

‘Although there are still a number of MPC members who take the position that inflation is transitory, the cards now seem stacked in favour of a hawkish turn from the central bank in December.’ 

However, with the BoE’s mis-communication over a November rate hike still fresh in the minds of many GBP investors, this morning’s dip in the Pound Australian Dollar exchange rate could also be attributed to traders seeking to avoid the rug being pulled out beneath them a second time. 

Australian Dollar (AUD) Buoyed by US Dollar (USD) Weakness 

At the same time, the Australian Dollar (AUD) is underpinned this morning by improving market risk appetite. 

The improvement in risk sentiment is likely down to a softening of the US Dollar (USD), which is under pressure due to falling US Treasury yields. 

This uptick in the Australian Dollar may also be partially attributed to recent comments by Reserve Bank of Australia (RBA) assistant governor Luci Ellis who predicts the global economy could be positioned to enjoy the ‘roaring twenties’ amidst a strong rebound in demand.  

Pound Australian Dollar Forecast: Rebound in UK Retail Sales to Buoy Sterling? 

Looking ahead to the end of the week, the Pound Australian Dollar exchange rate could receive a boost following the publication of the UK’s latest retail sales figures. 

Economists forecast October’s release will report a rebound, with sales growth expected to climb from –0.2% to 0.5%. Will an improvement in consumer spending, further fuel speculation the BoE could hike interest rates next month? 

Meanwhile, in the absence of any notable AUD data releases, the direction of the Australian Dollar is likely to be driven primarily by market risk appetite, potentially undermining the ‘Aussie’ if market sentiment sours. 

Matthew Andrews

Contact Matthew Andrews