Pound Australian Dollar (GBP/AUD) Exchange Rate Extends Gains despite Dovish Saunders Speech

Pound Australian Dollar Exchange Rate Climbs Further on Mixed Risk Sentiment

(Updated 16:00, 03/12/2021) The Pound Australian Dollar (GBP/AUD) exchange rate has continued to rise through today’s session despite Sterling headwinds, as the Australian Dollar (AUD) faces downside from general risk aversion.

While Bank of England (BoE) policymaker Michael Saunders commented that he’d be considering the effects of the Omicron Covid variant at December’s MPC meeting, news from the Federal Reserve was surprisingly upbeat: St Louis President James Bullard called for the Fed to begin tightening monetary policy, citing unexpectedly high inflation, strong economic growth and a labor market that is very tight.

USD upside has attracted further support away from the ‘Greenback’s’ peers, especially those of a more risk-sensitive nature – the ‘Aussie’ has continued to founder amidst a lack of data.

Markets’ attitude towards the Omicron variant remains mixed amidst comments from BioNTech CEO Ugur Sahin, affirming that the new variant might be able to infect vaccinated people and people with high exposure to Covid-19.

Following earlier reassurances that the new variant posed nothing to worry about, Sahin said today that:

‘It’s not clear if vaccinated people have sufficient protection to avoid severe disease from new variant… This highly mutant virus came earlier than I had expected. I had expected sometime next year and it’s already with us.’

Original article continues below:

GBP/AUD Exchange Rate Firms on Mixed Risk Sentiment

The Pound Australian Dollar (GBP/AUD) exchange rate is trending up this morning amidst a mixed market mood – Chinese services data missed expectations, weighing upon the Australian Dollar (AUD).

At the time of writing, GBP/AUD is trading at A$1.8830, up 0.4% from today’s opening levels.

Australian Dollar (AUD) Sinks on Risk Aversion, Chinese Data

The Australian Dollar is falling against its peers this morning as risk sentiment is uncertain, drawing support towards safe-haven currencies. US stocks futures are trading flat in the early European session and the 10-year US Treasury bond yield is moving sideways after rising nearly 3% on Thursday.

Also weighing upon the ‘Aussie’, Chinese data missed expectations this morning – the Caixin services PMI revealed a slowdown in service-sector activity in November, to 52.1 from 53.8 in October. This fell short of expectations of a smaller fall, to 53.

As Australia’s biggest trading partner, headwinds to the Chinese economy also exert downside on AUD.

Possibly affecting Australian Dollar movement ahead are various commodity dynamics. Coal and LNG shipments were strong in October, helping to offset the damage of falling iron ore exports, which dropped 40 per cent from a $19 billion peak in July to $11.4 billion in October.

Whether a pickup will occur is uncertain, as China plans to boost its domestic iron ore production and a global push for ‘green steel’ may see ore production and steelmaking move closer to higher-grade ore producers such as Europe, America and the Middle East.

Pound (GBP) Trades Mixed, Vaccine News Lends Support

The Pound (GBP) is trading in a mixed range against its peers today: losses are capped, however, as Covid booster jabs are proven effective at strengthening the body’s immune defences.

A trial of seven different vaccines revealed that the Moderna and Pfizer/BioNTech shots are the most effective – according to the Guardian, the study has raised hopes that another wave of severe disease caused by the Omicron variant may be prevented.

Prof Saul Faust, the trial lead and director of the NIHR clinical research facility commented:

‘These are remarkably effective immunological boosters, way above what is needed to prevent hospitalisation and death.’

The news appears to overridden significant Pound downside caused by a slightly lower-than-expected finalised services PMI. The UK’s Markit/CIPS services PMI final reported a slowdown in service-sector activity to 58.5 in November, as opposed to the 58.6 figure expected.

Pound Australian Dollar Exchange Rate Forecast: Saunders Speech to Drive Movement Ahead?

Later this morning, Bank of England (BoE) policymaker Michael Saunders is scheduled to speak – potentially influencing Sterling sentiment and subsequently, the Pound Australian Dollar exchange rate.

A known hawk, Saunders could exert GBP upside if his comments predict minimal economic damage as a result of the Omicron variant.

A lack of Australian data, meanwhile, leaves AUD to trade on external factors.

Olivia Evershed

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