Pound Australian Dollar (GBP/AUD) Exchange Rate Wavers amid Risk-On Impulse

Pound Australian Dollar (GBP/AUD) Trades Narrowly amid Persisting UK Domestic Woes

The Pound Australian Dollar (GBP/AUD) exchange rate is fluctuating as a modest improvement in global market sentiment is offset by mounting UK domestic issues.

At time of writing, the GBP/AUD exchange rate is around $1.7221, relatively unchanged from this morning’s levels.

Pound (GBP) Remains Subdued Despite Upbeat Global Market Sentiment

The Pound (GBP) is struggling for demand today and remains quiet against its rivals as a lack of data leaves Sterling open to ongoing domestic woes. With US inflation printing softer-than-expected, with many experts claiming that inflationary pressures have finally peaked, the market mood shifted.

Keeping a lid on any gains for the Pound is the ongoing cost-of-living crisis in the UK. Ministers are expected to meet gas and electric executives today, with a hope of increasing the windfall tax on record profits. Former Prime Minister Gordon Brown has called on the government to step up action to support UK households. Scrapping the energy price cap and temporary re-nationalisation of energy firms that won’t lower bills are actions that Brown suggests with time running out. He said:

‘Time and tide wait for no one. Neither do crises. They don’t take holidays, and don’t politely hang fire – certainly not to suit the convenience of a departing PM and the whims of two potential successors.’

With recession fears growing, and the cost-of-living crisis exacerbated by inflationary pressures, the Pound could remain under pressure.

 Australian Dollar (AUD) Fluctuates Despite Risk-On Impulse

The Australian Dollar (AUD) is enjoying mixed success after the softer-than-expected US inflation data buoyed market moods.

However, growing concerns of a global economic downturn still linger. Combined with the mounting geopolitical tensions between China and the US, downward pressures persist. Relations between China and Australia have become increasingly strained, and with the unfolding events in Taiwan, global risk sentiment is precariously on edge.

Chinese Ambassador to Australia Xiao Qian made an appearance at the National Press Club in Canberra, the first time in 18 years that a Chinese ambassador accepted an invitation. But the questions merely highlighted how uncompromising China is on the situation with Taiwan. Xiao Qian went on to claim that China would use ‘all necessary means’ to reunify Taiwan to the mainland.

The ambassador also made clear how the relationship with Australia is becoming increasingly strained. With differences over the Taiwan situation, detaining of Australian citizens, and China’s refusal to condemn Putin and the Ukraine invasion, a souring relationship could weigh on the Australian economy, and in turn, the ‘Aussie’.

Pound Australian Dollar Exchange Rate Forecast: Contracting UK Economy to Sink the Pound?

With data remaining thin on the ground for then Pound Australian Dollar, all eyes will be on the release of UK GDP data for the month of June. Expectations of a 0.9% decline could exacerbate fears of a looming recession, something that the BoE fully expects. If GDP prints to forecast, the Pound could plummet.

Elsewhere, ongoing geopolitical tensions involving China could continue to weigh on global market sentiment and the ‘Aussie’.

Danny Tingle

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