Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as Market Mood Sours

Pound Australian Dollar (GBP/AUD) Exchange Rate Firms amid Risk-Off Mood

The Pound Australian Dollar (GBP/AUD) exchange rate strengthened this morning as a souring market mood puts pressure on the risk-sensitive ‘Aussie’. However, concerns about the UK retail sector may be limiting the upside.

At the time of writing, GBP/AUD is trading at around AU$1.7935. This is up almost 0.3% from its low point at the start of today’s European session but lower than yesterday’s high.

Australian Dollar (AUD) Falls amid Gloomy Sentiment

The Australian Dollar (AUD) has slipped this morning as a turnaround in global risk sentiment dampens AUD’s appeal.

Earlier in the week, expectations that the Federal Reserve would soften its stance on interest rates cheered markets. However, these risk-on tailwinds have started to die down.

Instead, investors are growing concerned about surging Covid cases in China. With Beijing enforcing its strict zero-Covid policy, markets fear that fresh lockdowns in the world’s second-largest economy could deepen the coming global economic downturn.

The news is particularly troubling for Australia, as the country’s export-oriented economy relies on China as its largest trading partner. Lockdowns in China could dent Australian exports.

China is also an international manufacturing hub, so fears of lockdown-related disruption are weighing on commodity markets. As a commodity-linked currency, the Australian Dollar is struggling.

Pound (GBP) Capped by ‘Bleak Friday’ Concerns

Meanwhile, the Pound’s (GBP) gains against the ‘Aussie’ currently look limited, as Sterling is failing to rise against many of its other peers.

Worries about strike action may be hampering the Pound’s upside. Today is Black Friday – a crucial event for retailers – but Royal Mail workers are on strike. In addition, workers for online retail and delivery giant Amazon are planning protests.

The industrial action could cause significant disruption at a time when retailers are already fighting for survival. The cost-of-living crisis has seen consumers tighten their belts, while businesses also face soaring input costs and energy bills.

The Centre for Economics and Business Research (CEBR) thinktank has dubbed today ‘Bleak Friday’:

‘The cost-of-living crisis, combined with warnings that discounts are often more generous at other times of year and the threat of a Royal Mail strike, will mean that it is a weak year for Black Friday sales and we may see January sales start early in an attempt to shift stock.’

With the UK retail sector in a dire state, Sterling may find its upside limited today.

GBP/AUD Exchange Rate Forecast: Muted Movement amid Lack of Data?

As the week’s trade comes to a close, a lack of economic data could see limited movement in the Pound ‘Aussie’ pair.

GBP investors will likely focus on domestic UK news. Although some analysts are hopeful for a milder UK recession, concerns remain. Intensifying strike action and the cost-of-living crisis threaten to inflict further damage on the British economy. These fears could limit the Pound’s upside today.

As for the Australian Dollar, risk appetite will likely remain the key driver of movement. If sentiment sours further, AUD could see deeper losses.

Early next week we have Australia’s latest retail sales data. Could slowing sales see the ‘Aussie’ start the week on the defensive?

Samuel Birnie

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