Pound Australian Dollar Remains Firm on Increased Rate Hike Bets
(Updated 9:00, 22/2/23) The Pound Australian Dollar (GBP/AUD) exchange rate continues its rally in the wake of better-than-expected PMI figures in the UK. With an unexpected pickup in business activity, investors are confident that the UK could avoid a recession. Additionally, a resilient economy could also give the Bank of England (BoE) more breathing room for further interest rate hikes, buoying GBP investors.
Meanwhile, the Australian Dollar remains under pressure from an increasingly uncertain market mood. Safe-haven flows dominated as geopolitical tensions escalated are compounded by fears of further tightening from central banks.
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Pound Australian Dollar (GBP/AUD) Spiked on Better-than-Expected Industry Performance
The Pound Australian Dollar (GBP/AUD) exchange rate is enjoying a surge in demand in the wake of stronger-than-expected PMI figures. A cautious market mood hampers the risk-sensitive Australian Dollar.
At time of writing, the GBP/AUD exchange rate is around $1.7545, a 0.72% jump from this morning’s opening levels.
Pound (GBP) Boosted by Highest Services PMI in Eight Months
The Pound (GBP) is strengthening considerably this morning in the wake of much better-than-expected PMI figures. The service sector jumped the highest in eight months to 53.3, the first time it has entered expansion territory since August 2022.
Comfortably beating market expectations of 49.2, the service sector saw a renewed strength in business activity in February. An improved global economic outlook and declining political uncertainty gave a welcome boost. However, signs of a continued squeeze on consumer spending mean the sector isn’t completely out of the woods yet.
Meanwhile, manufacturing also surprised to the upside and increased to 49.2 from 47 in January. Against predictions of a mild improvement to 47.5, the reading is the highest in seven months. A third straight month of significantly improving performance is lending support to Sterling.
Elsewhere, Foreign Secretary James Cleverly commented today that talks are ongoing with the EU over the Northern Ireland protocol. With optimism growing of a deal being struck this week, the Pound could be buoyed at the prospect.
Australian Dollar (AUD) Undermined by Mounting Geopolitical Pressures
Meanwhile, the Australian Dollar (AUD) is struggling to shrug off an increasingly cautious market mood. US-Sino tensions continue to simmer after US Secretary of State Antony Blinken claimed that China was planning to provide lethal aid to Russia. With reports of China’s top diplomat Wang Yi expected to visit Russian President Vladimir Putin tomorrow, global market sentiment is wavering.
Elsewhere, President Joe Biden made a surprise visit to Kyiv to meet with Ukrainian President Volodymyr Zelensky. With increased support from the West, much to the ire of Putin, fears of the conflict escalating could be weighing on market mood.
Turning to domestic matters, the minutes from the Reserve Bank of Australia (RBA) meeting were released. Whilst the board unanimously agreed on further interest rate hikes, the hawkish tone did little to inspire AUD investors.
Pound Australian Dollar Exchange Rate Forecast: Post-Brexit Deal to Bolster Sterling?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement as negotiations with the Northern Ireland protocol rumble on. With Prime Minister Rishi Sunak trying to close the post-Brexit trade deal, a successful negotiation could see the Pound climb.
Meanwhile, market sentiment is likely to continue dominating trade for the Australian Dollar. Any further news from either Ukraine or China could weigh on market mood. Souring relations between the US and China could exacerbate global fears, potentially dragging the ‘Aussie’ lower.