Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs as Iron Ore Hits Six-Month Low

(Updated 16:50 17/06/22)

The Pound Australian Dollar (GBP/AUD) exchange rate continued to trend higher over the course of the day. A fragile market mood kept investors placing bets away from riskier currencies like the Australian Dollar (AUD).

Further falls in the price of iron ore likely also helped the exchange rate to climb today. Prices of the commodity extended their losses for a sixth conseucitve session.

Additionally, reports indicating a surge in UK domestic holiday bookings may have helped to bolster confidence in the country’s economic recovery.

At time of writing the GBP/AUD exchange rate is at around $1.7637, which is up roughly 0.6% from this morning’s opening figures.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Firms as Equities Markets Tumble

The Pound Australian Dollar (GBP/AUD) exchange rate is climbing higher today. A pullback in global risk appetite is likely helping the currency pair to make steady gains. Recession fears around the globe have increased following a week of multiple interest rate hikes from central banks. This has in turn caused a drastic fall in the equities markets.

Yesterday’s interest rate hike from the Bank of England (BoE) may also continue to prompt some upward movement. Major gains for GBP/AUD could be limited by reports that UK inflation is due to hit fresh highs later in 2022.

At time of writing the GBP/AUD exchange rate is at around $1.7651, which is up around 0.7% from this morning’s opening figures.

Pound (GBP) Slips after Dour BoE Outlook

The Pound (GBP) is falling against many of its rivals today. The currency is seeing some gains against riskier competitors amid a pullback in risk appetite. On the other hand, warnings that UK inflation could reach further highs later this year may be weighing on Sterling.

Thursday’s interest rate decision from the BoE could also be preventing major losses for the Pound today. The central banks decision to raise rates by 0.25%, whilst underwhelming markets, has seen more bullish investors renew bets on the currency.

The prospect of future aggressive moves from the central bank may also be helping to underpin GBP. Speaking after the interest rate decision, the BoE signalled that it was ready to ‘act forcefully’ if required to combat soaring inflation.

The Bank of England’s forward outlook for the UK economy may be continuing to pull the currency lower today, however. The central bank revised forecasts to predict that inflation is likely set to climb above 11% in October when the energy price gap rises.

Australian Dollar (AUD) Falls as Iron Ore Demand Contracts

The Australian Dollar (AUD) is sliding against its rivals today amid a risk-off market mood. Increased fears of a global economic slowdown have seen equities markets around the world slump drastically today. A poor week for iron ore may also be pushing the ‘Aussie’ lower today.

Prices of iron ore have seen their steepest weekly fall in four months this week as Chinese steel mills reduced output. The move comes amid weak demand and falling profits.

The recent surge in Covid-19 cases in China is thought to have had a significant impact, as well as the beginning of the country’s rainy season.

GBP/AUD Exchange Rate Forecast: Will UK Inflation Figures Weaken Sterling?

Looking to the week ahead for the Pound, May’s inflation figures could have a mixed impact on Sterling. On the one hand, the forecast high rate could further inflame recession fears and weaken the currency. On the other, high inflation could be taken as a sign by investors that the BoE may raise rates more aggressively in the near-future.

PMIs for the UK on Thursday could pull GBP if growth continues to slow in line with recent trends. Additionally, a forecast slump to May’s retail sales on Friday could also see the Pound fall further.

For the Australian Dollar, multiple speeches from RBA Governor Rob Lowe could help the currency to recover some of its losses if he maintains a hawkish stance. Meeting minutes from the central bank on Tuesday could have a similar effect.

The forecast fall to Australian PMIs on Thursday could limit any potential gains, however.

Gareth Monk

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