Pound Australian Dollar (GBP/AUD) Exchange Rate Extends Upside amid Risk-Off Mood

Pound Australian Dollar (GBP/AUD) Exchange Rate Firms as Market Sentiment Sours

(Updated 16:30, 14/1/22) The Pound Australian Dollar (GBP/AUD) exchange rate continued to climb this afternoon, fuelled by the UK’s strong GDP data and a gloomier market mood that dented the risk-sensitive ‘Aussie’.

At the time of writing, GBP/AUD is trading at around AU$1.893. This is almost 0.5% up from this morning’s opening level of AU$1.884.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Boosted by Strong GDP Data 

The Pound Australian Dollar (GBP/AUD) exchange rate has strengthened today, after the UK economy recovered to pre-pandemic levels in November. 

Meanwhile, the ‘Aussie’ is struggling to put up a resistance following choppy trade overnight. 

Australian Dollar (AUD) Slips amid Risk-Off Mood and Covid Concerns 

The Australian Dollar (AUD) fell overnight, though it managed to regain some losses towards the end of the session. 

The downside came as market sentiment soured, which dampened the appeal of the risk-sensitive ‘Aussie’. Earlier this week, markets shrugged off more hawkish comments from the Federal Reserve, with investors seeking riskier, higher-yielding assets despite impending interest rate rises. Yet overnight the optimism began to fade somewhat. The spread of Omicron is still causing uncertainty and economic damage around the world. 

The Australian Dollar recovered some of its losses following mixed Chinese trade data. Chinese imports tumbled from 31.7% in November to 19.5% in December. However, exports printed marginally higher than economists expected. As a result, China’s trade surplus rose from $71.72bn to $94.46bn month-on-month. 

The figures weren’t strong enough to offer AUD support heading into the European session, though. So far this morning, the ‘Aussie’ has fallen sharply against Sterling. 

Pound (GBP) Firms as UK GDP Cheers Investors 

Meanwhile, the Pound (GBP) has jumped higher this morning after the latest UK GDP report beat forecasts. 

In November, the UK economy grew by 0.9% – far better than expectations of 0.4% growth. This puts UK GDP 0.7% higher than it was in February 2020, just before the pandemic hit. Encouragingly, growth occurred across all major sectors of the UK economy. In previous months, growth has often been uneven. 

However, many economists are pointing out that the robust growth happened before Omicron swept across the UK. James Smith, Research Director at the Resolution Foundation, commented: 

‘Today’s GDP data show an economy growing robustly on the eve of omicron, with a welcome return to pre-pandemic levels of monthly output as sectors such as retail grew rapidly. 

‘But more timely data show that consumer-facing services like hospitality hit a brick wall in December and January, as families become more cautious in the face of rising cases. 

‘This, combined with rising inflation and soaring energy bills, means we may need to work back towards this November peak of output in early 2022.’ 

These concerns could put a lid on the Pound’s gains today. 

GBP/AUD Exchange Rate Forecast: Could the Pound Climb Higher? 

Looking ahead, the extent of the Pound’s upside remains to be seen. The November GDP figures are impressive and represent an important milestone in the UK’s economic recovery. GBP investors may be able to shake off growth concerns for 2022 and instead just enjoy today’s strong data. 

However, UK political jitters could continue to impact the Pound as revelations about social events at 10 Downing Street continue to mar Boris Johnson’s credibility. The opposition can smell blood, and even some senior Tory MPs are openly calling on Johnson to step down. If there are any more significant developments today, this could also limit Sterling’s upside. 

Samuel Birnie

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