Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound as AU Employment Surprises to Downside

Pound Australian Dollar (GBP/AUD) Exchange Rate Remains in Narrow Range Despite Risk-Off Mood

(Updated 16:26 15/09/22)

The Pound Australian Dollar (GBP/AUD) exchange rate continued to trade in a narrow range today. A retreat in global risk appetite limited losses for the currency pair amid fears of a widespread recession.

Confirmation that UK Chancellor Kwasi Kwarteng will deliver an emergency budget next week also underpinned GBP/AUD today. The ‘mini-budget’ is expected to introduce winter tax cuts and more details on the government’s energy support package.

At time of writing the GBP/AUD exchange rate is at around $1.7109, virtually unchanged from this morning’s opening figures.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways amid Risk-On Mood

The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. A risk-on impulse is likely weighing on the pair. GBP/AUD may also be facing Brexit-related headwinds today.

The currency pair may be underpinned by worse-than-expected Australian employment data, however. The figures saw investors pare back bets on further rate hikes from the Reserve Bank of Australia (RBA).

At time of writing the GBP/AUD exchange rate was at around $1.7070, virtually unchanged from this morning’s opening figures.

Australian Dollar (AUD) Ticks Higher Despite Downbeat Employment Data

The Australian Dollar is edging higher today amid a risk-on impulse in the markets. A surprise uptick in unemployment is likely undermining the ‘Aussie’.

Unemployment had been forecast to remain at record-lows of 3.4%, but instead inched up to 3.5%. Figures also indicated that Australia added 33,500 jobs to its economy in August, below a forecast increase of 35,000.

The data suggested that the country’s job market was growing at a slower pace than expected. This may be limiting bets on further rate hikes from the RBA. Markets are only anticipating a 0.25% rate hike from the RBA at its next meeting.

A downturn in iron ore prices today may also be capping gains for AUD. Covid-19 curbs in China as well as the impact of Typhoon Muifa on the country’s infrastructure could be limiting demand for the commodity.

Pound (GBP) Slides as Article 16 Date Draws Near

The Pound (GBP) is slipping amid a retreat in global risk appetite today. Brexit-related headwinds may also be weighing on the currency today.

European Union (EU) representatives have remained concerned at the UK’s lack of response as the date to trigger Article 16 approaches. On Wednesday, the EU’s chief Brexit negotiator Maros Sefcovic put forward further proposals to reduce the number of checks on goods crossing the Irish Sea. The comments were seen as a potential olive branch to the UK.

Sterling may also be facing pressure amid concerns over the implementation on PM Liz Truss’ energy support plan. The plan involves substantial borrowing and has led to concerns amongst economists of stagflation in the UK.

Bank of England (BoE) rate hike bets may be lending support to Sterling today, however. Markets are still betting on a 0.5% rate hike from the central bank next week.

GBP/AUD Exchange Rate Forecast: Will UK Retail Sector Continue to Struggle?

Looking ahead to the remainder of the week for Sterling, a forecast sharp downturn in August’s retail sales could pull the currency lower on Friday. A poor outlook for the sector could also dampen the UK economy’s long-term outlook.

Bets on an interest rate hike from the BoE at their meeting next week could lend support to GBP, however.

Trades surrounding the Pound could remain somewhat muted however as the UK period of mourning continues.

The Australian Dollar will see no further significant data over the rest of the week. Retail sales and industrial production figures from China could push the ‘Aussie’ higher on Friday. If the figures rise as forecast, they could indicate a recovery for the world’s second-largest economy.

Any further fluctuations in iron ore prices could also affect the ‘Aussie’, as well as any changes to risk appetite.

Gareth Monk

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