Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as UK’s NI Protocol Bill Passes

Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as Iron Ore Prices Climb

(Updated 16:41 28/06/22)

The Pound Australian Dollar (GBP/AUD) exchange rate continued to fall today. A risk-on impulse likely pulled the exchange rate lower today as it supported gains for the Australian Dollar (AUD). A sustained rally in the commodities market also weighed upon the currency pair today. The price of iron ore rose by around 5% today which helped to push the ‘Aussie’ to fresh highs.

At time of writing the GBP/AUD exchange rate is at around $1.7629, which is down roughly -0.5% from this morning’s opening figures.

Pound Australian Dollar (GBP/AUD) Exchange Rate Drops amid Risk-On Trading

The Pound Australian Dollar (GBP/AUD) exchange rate is slipping lower today. News that China will further ease its Covid-19 restrictions may be pushing the currency pair lower today. A risk-on impulse and Brexit-related headwinds may also be causing GBP/AUD to fall.

At time of writing the GBP/AUD exchange rate is at around $1.7650, which is down around -0.4% from this morning’s opening figures.

Pound (GBP) Slips as UK Passes NI Protocol Legislation

The Pound is trending lower against its competitors today whilst making more significant losses against its riskier rivals.

The UK government’s legislative efforts to alter the Northern Ireland Protocol are likely denting confidence in Sterling today. The bill overcame its first major hurdle on Monday evening after MPs voted 295 to 221 in favour to pass the legislation.

The move is likely to increase fears of further disputes between the UK and the EU. In weeks prior, EU ambassadors had threatened to restart legal action against the UK should the legislation pass through parliament.

The Pound may also be struggling today as investors pare back bets on aggressive action from the Bank of England (BoE) at their next meeting. The UK’s poor economic growth has led to fears that overly hawkish rate hikes could push the country closer to a recession.

Analysts at accountancy firm KPMG said:

‘The Monetary Policy Committee will have to weigh the risk of high inflation spilling into pay growth against the risk of a recession. Facing such a trade-off, we think it is likely that the doves on the Committee could swing the balance towards a more gradual uplift than is currently priced in by the markets.’

Australian (AUD) Bolstered as China Eases Covid Restrictions

The Australian Dollar (AUD) is climbing higher today amid a risk-on impulse in the markets. News that China will be further easing its Covid-19 restrictions could also be helping to boost the ‘Aussie’ today.

China announced today that they would be cutting their quarantine time for travellers to the country from 14 days to 7. Chinese authorities highlighted the shorter incubation time of the Omicron variant as a reason behind the move. The change to regulations is expected to make the transition of business staff between the US and China much easier.

News from Beijing and Shanghai today may also be helping to bolster AUD. Both cities reported no new local Covid infections for the first time since late February on Tuesday.

A rise in the price of iron could also be pushing the ‘Aussie’ higher today. Prices of the commodity have climbed around 4% today amid a rally in the markets.

GBP/AUD Exchange Rate Forecast: Will Bailey Signal Hawkish BoE Turn?

Looking to the week ahead for the Pound, investors will be keenly awaiting a speech from BoE Governor Andrew Bailey on Wednesday. Markets are anticipating that Bailey will maintain a cautious tone which prompt a fall in Sterling.

The final reading of first quarter GDP figures could also pull the currency lower on Thursday if they contribute to the UK economy’s poor outlook.

The fallout from the UK government’s legislation concerning the Northern Ireland Protocol may also continue to weigh on the Pound.

For the Australian Dollar, a forecast drop to retail sales figures on Wednesday could see the ‘Aussie’ slip lower.

Further fluctuations in the price of iron ore could also prompt movement in AUD as well as other data releases from China throughout the week. If the data continues to indicate that the world’s second-largest economy is struggling then it could dent confidence in AUD.

Gareth Monk

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