Pound Australian Dollar (GBP/AUD) Exchange Rate Firms in Downbeat Trade

Pound Australian Dollar Exchange Rate Rallies amid Gloomy Market Mood

The Pound Australian Dollar (GBP/AUD) exchange rate is trending higher this morning. A risk-off mood underpinning the pairing.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7705. Up roughly 0.3% from today’s opening rate.

Australian Dollar (AUD) Slides in Souring Trade

The Australian Dollar (AUD) is trending lower this morning. A broadly risk-off mood undermining the appeal of the high-yield currency.

The bearish mood comes amid another selloff in equity markets. Recession fears once again taking their toll on investor confidence.

However the publication of Australia’s latest retail sales figures have helped to somewhat temper the ‘Aussie’s losses.

Preliminary data released overnight revealed sales growth printed at 0.9% in May. This matched April’s figures and beat forecasts sales growth would slow to 0.4%.

The upbeat sales figures indicate consumer demand remains resilient in the face of soaring inflation. Bolstering hopes economic growth will remain robust through the second quarter.

Pound (GBP) Tempered by Political Uncertainty

The Pound (GBP) is trading with modest gains against the Australian Dollar this morning. However Sterling is struggling to replicate this success elsewhere.

This comes amid heightened political uncertainty in the UK. The Pound remains suppressed after MPs voted to pass a second reading of the government’s Northern Ireland protocol bill. The bill will grant the government the power to unilaterally alter the protocol. GBP investors fear this could trigger a UK-EU trade war.

The threat of another Scottish independence referendum is also limiting the Pound’s upside potential this morning.

While the UK government will no doubt resist Nicola Sturgeon’s call for a referendum. The prospect of a drawn-out legal challenge from the Scottish First Minister is unlikely to fill GBP investors with confidence.

Pound Australian Dollar Forecast: Bailey Speech in the Spotlight

The Pound Australian Dollar (GBP/AUD) exchange rate could face headwinds this afternoon following a speech by Bank of England (BoE) Governor Andrew Bailey.

Bailey is scheduled to speak at the European Central Bank’s (ECB) annual forum on monetary policy.

Analysts suggest Bailey faces a challenge in communicating the BoE’s message on policy. He will need to balance expectations for further rate hikes against worries that tightening too quickly could tip the UK into a recession.

Economists at Commerzbank, suggest:

‘Monetary policy remains a difficult balancing act for the BoE, also from a communication point of view.

‘It remains to be seen to what extent BoE Governor Andrew Bailey will be able to convince Sterling investors in his speech at the ECB forum in Sintra today. It is unlikely to be an easy task though. As a result, it is likely to be difficult for Sterling to appreciate.’

Meanwhile, the Australian Dollar may continue to be driven by market risk dynamics. Expect to see the ‘Aussie’ to stay on the defensive so long as the risk-off mood persists.

Matthew Andrews

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