Pound Australian Dollar (GBP/AUD) Exchange Rate Firms as Markets are Subdued
The Pound Australian Dollar (GBP/AUD) exchange rate is strengthening this morning despite a lack of UK data and lingering political uncertainty weighing on the Pound (GBP).
At the time of writing, the GBP/AUD exchange rate is trading at around AU$1.79581, which is roughly up 0.3% from this morning’s opening rate.
Pound (GBP) Gains Capped amid Lack of Data
The Pound is up against the Australian Dollar (AUD), but ceding ground elsewhere, struggling as a lack of data has left investors with little to work with.
In lieu of data, GBP traders are focusing on domestic headlines.
The Pound rallied earlier in the week as Rishi Sunak became the new Prime Minister. However, although Sterling is stronger than prior to his arrival as PM, those tailwinds have somewhat faded as investors await the arrival of the delayed fiscal plan.
Chancellor Jeremy Hunt tried to soothe markets upon announcing the delay. Hunt said:
‘We have a new prime minister, the prospect of much longer term stability for the economy and the country. In that context, a short two-and-a-half-week delay is the best way we will make sure that it is the right decisions we take.’
However, the delay in the fiscal plans is weighing on interest rate rise bets. The Bank of England (BoE) is now faced with making their next interest rate decision without the fiscal plan or budget forecasts to guide the hike. As such, GBP investors are being reserved about their investments this morning.
Australian Dollar (AUD) Falls as Market Sentiment Sours
The Australian Dollar, meanwhile, is struggling for support this morning as risk aversion dents the ‘Aussie’.
The currency’s losses are also being compounded by poor data from China. The Australian Dollar acts as a proxy-currency for the world’s second largest economy. As such, any sign of it faltering can have a negative impact on AUD.
Chinese industrial profits have fallen by 2.3% and PMI data also pointed to a weak start in this quarter. Analysts from Goldman Sachs commented:
‘High-frequency data including emerging industries PMI (EPMI), new home sales, auto sales, transportation and long holiday tourism revenue pointed to a likely weak start in Q4.’
This slowing of growth has investors on edge about a recession in the country, which would have a global impact.
Pound Australian Dollar Forecast: US Data to Rattle Markets and Dent AUD?
Looking ahead, the Pound Australian Dollar exchange rate could be driven by UK domestic headlines.
Investors will be paying close attention to political developments. Any indication that the stability Sunak has offered markets is starting to flag could dent the Pound.
Elsewhere, a snap election in Northern Ireland could see Sterling face headwinds. The tensions on the island of Ireland have hurt GBP in the past, as it could impact UK trade.
Turning to AUD, risk appetite is likely to drive most movement in the ‘Aussie’. US inflation this afternoon could affect the global market mood. If inflation rises, it will put more pressure on the Federal Reserve to raise interest rates, which could in turn spook markets. If so, GBP/AUD could rise further.