(Updated 16:40 26/05/22)
The Pound Australian Dollar (GBP/AUD) exchange rate edged higher today. UK Chancellor Rishi Sunak’s announcement of a support package for UK households provided a little support to the pair. A retreat to risk appetite also benefitted GBP/AUD over the course of the day.
At time of writing the GBP/AUD exchange rate is at around $1.7775, which is up roughly 0.2% from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound amid Poor UK Outlook
The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. Pared back rate hike bets and Brexit-related tensions are likely preventing the pair from climbing any higher. A drop to Australian business confidence and investment may limiting any major losses for the currency pair, however.
At time of writing the GBP/AUD exchange rate is at around $1.7732, virtually unchanged from this morning’s opening figures.
Pound (GBP) Ticks Lower as Sunak set to Announce Windfall Tax
The Pound (GBP) is trending lower against many of its rivals today. A poor forward outlook for the UK economy may be weighing on Sterling today. Concerns over Brexit-related tensions as well as turmoil in domestic politics could also be pushing GBP lower.
Reports that UK inflation is set to continue to soar may be dampening long-term confidence in Sterling. The Institute for Fiscal Studies (IFS) has warned that further surges to the UK’s energy gap could see inflation climb as high as 14%.
UK energy regulator Ofgem told UK MPs this week that the cap on household bills could climb as high as £2,800 in October. After repeated calls to act, Chancellor Rishi Sunak is set to announce a windfall tax on energy companies to fund additional measures.
The scale of the country’s cost-of-living crisis has led to fears that the UK could fall into a recession in 2022. These concerns have seen investors pare back bets on further interest rate hikes from the Bank of England (BoE). This is likely in turn preventing the Pound from making any major gains today.
The fallout from the publication of the report into the ‘Partygate’ scandal may also be limiting bets on Sterling today. Confidence in PM Boris Johnson’s premiership has hit new lows in recent days, with more Conservative MPs calling for his resignation.
Finally, negotiations over the Northern Ireland Protocol may be causing concerns over the stability of the currency. Last week UK Foreign Secretary Liz Truss stated that she would be looking to scrap parts of the agreement through legislative efforts.
Australian Dollar (AUD) Trades Narrowly Despite RBA Rate Hike Bets
The Australian Dollar (AUD) is seeing muted trading against many of its rivals today. A mild risk-on trading sentiment is extending some support to the ‘Aussie’ today. A worsening outlook for the global economy may be limiting risk appetite, however.
Expectations of hawkish action from the Reserve Bank of Australia (RBA) may also be limiting significant losses for AUD today.
Economists are expecting that the RBA will raise interest rates at their June 7 meeting, particularly after the Reserve Bank of New Zealand’s (RBNZ) rate hike earlier this week.
On the other hand, a fall to Australian business investment may be pulling AUD lower today. Investment in the first quarter of 2022 fell unexpectedly as floods, supply bottlenecks, and raw material shortages hampered growth.
GBP/AUD Exchange Rate Forecast: Will Australian Retail Sector Struggle?
With no further significant data for the Pound (GBP) this week, any challenges to PM Johnson’s leadership could dent confidence in Sterling. Additionally, any further signals of a dovish course of action from the BoE could also keep trading in GBP muted.
For the Australian Dollar (AUD), a forecast drop to April’s retail sales on Friday could pull the currency lower if they print as expected.