Pound Australian Dollar (GBP/AUD) Exchange Rate Dented by Recession Fears
The Pound Australian Dollar (GBP/AUD) exchange rate fell this morning amid dismal headlines about some big UK businesses. However, dovish comments from the Reserve Bank of Australia (RBA) limited the pair’s losses.
At the time of writing, GBP/AUD is trading at around AU$1.7707, about 0.2% down on the day.
Pound (GBP) Stumbles amid UK Business Worries
The Pound (GBP) dropped this morning as concerns about the UK economy weighed on GBP investors’ minds.
Following last week’s recession warning from the Bank of England (BoE), Sterling is extremely sensitive to news about the UK economy. As a result, troubling reports from large UK companies are hitting GBP exchange rates today.
Retail giant Marks & Spencer have warned of a ‘gathering storm’, with profits declining 24% over the second and third quarters of this year. Meanwhile, Made.com has entered administration, Wetherspoons is selling 39 more of its pubs, and ITV reported a deterioration of the UK ad market.
All these troubling business developments point to an increasingly tough time for the UK economy, which in turn is pushing Sterling lower.
Australian Dollar (AUD) Undermined by Dovish RBA
Meanwhile, the Australian Dollar (AUD) is trimming its gains against the Pound following some dovish comments from Reserve Bank of Australia (RBA) Deputy Governor Michele Bullock.
Bullock argued that the RBA has ‘already raised rates aggressively’, suggesting that the pace of tightening will continue to slow in the coming months.
She added that ‘there are good reasons to think we are approaching the peak of inflation this cycle’, and that easing off the brakes now would help prevent an economic downturn.
Following these remarks, markets pared back bets for ongoing rate hikes from the RBA, thereby sapping the appeal of AUD.
GBP/AUD Exchange Rate Forecast: ‘Aussie’ to Lose Gains on Dovish RBA Expectations?
With no economic data due out for the remainder of today’s session, GBP/AUD may be primarily driven by risk appetite and domestic UK factors.
For the Pound, political jitters and economic concerns continue to drive volatility. As a result, we may see ongoing erratic movement in GBP. Any signs of further political turbulence could weigh on Sterling, while more warnings about the UK’s dire economic outlook could also push the Pound lower.
For the ‘Aussie’ the latest consumer inflation expectations overnight could cause some movement. Economists expect inflation expectations to ease, which may see markets further scale back bets for RBA interest rate rises. If so, AUD could drop.