Pound Australian Dollar (GBP/AUD) Exchange Rate Firms on UK Gas Hopes and Widespread Risk Aversion
The Pound Australian Dollar (GBP/AUD) exchange rate rose this morning. A risk-off market mood is weighing on the Australian Dollar (AUD) while news of a US-UK gas deal may be boosting the Pound (GBP).
At the time of writing, GBP/AUD is trading at around AU$1.8201, about 0.5% higher than today’s opening rate.
Pound (GBP) Strengthens amid US-UK Gas Deal
The Pound is strengthening today, without a clear catalyst for the movement, amid a notable lack of impactful UK data.
News that the US will increase gas exports to the UK may be helping to lift Sterling. Prime Minister Rishi Sunak hopes the new deal to double imports of US liquefied natural gas (LNG) over the next year will shield the UK from further increases in the cost of European energy.
Soaring energy costs have hammered European economies this year, driving up inflation and triggering a cost-of-living crisis. If the UK can insulate itself from further jumps in the price of gas, households and businesses across the UK may be spared significant economic pain in 2023.
This in turn could mean the current economic recession in Britain is shorter and shallower than initially feared.
Australian Dollar (AUD) Down as Market Mood Sours
Meanwhile, the risk-sensitive Australian Dollar is falling against the majority of its peers as a downbeat market mood weighs on the currency.
Equity markets are down today, indicating a risk-off market mood, as investors worry about global geopolitical and economic risks.
Recently, Ukraine has launched attacks deep into Russian territory. Since Russia’s invasion, most of the fighting has taken place on Ukrainian soil. With Kyiv now taking the fight to Russia, there are fears this could represent another escalation in the conflict.
US Secretary of State Antony Blinken has distanced the Whitehouse from the strikes, amid fears they could lead to a direct confrontation between the US and Russia. Blinken said:
‘We have neither encouraged nor enabled the Ukrainians to strike inside of Russia’.
In addition, a slump in Taiwan’s exports is the latest indicator of a slowing global economy.
These fears are weighing on the risk-sensitive ‘Aussie’.
GBP/AUD Exchange Rate Forecast: RBA Bulletin to Boost the ‘Aussie’?
Looking ahead, risk appetite will likely drive most movement in the Pound ‘Aussie’ pair. If market sentiment sours further, Sterling could extend its gains against the riskier Australian Dollar. However, if global markets grow more upbeat, AUD could recoup its losses.
Tonight, Reserve Bank of Australia (RBA) expectations could impact the ‘Aussie’. The RBA is set to release its latest bulletin, providing insights into the Australian economy and financial system. If the bank’s outlook is positive and signals further interest rate rises, AUD could rally. However, if analysts at the bank are concerned about a coming economic slowdown, the Australian Dollar may dip.
Australia’s balance of trade data could also impact GBP/AUD. A drop in exports would likely hurt the ‘Aussie’.
As for Sterling, UK economic data remains scarce. Therefore, the Pound may trade without a clear direction. GBP investors could also focus on domestic UK headlines for impetus.