Pound Australian Dollar (GBP/AUD) Exchange Rate Narrows amid Post SVB Bullish Trade
(Article updated 9:10, 14/4/2023) The Pound Australian Dollar (GBP/AUD) exchange rate is narrowing this morning, as markets continue to digest the collapse of Silicon Valley Bank (SVB).
Banks across the world are under heavy selling pressure, which appears to have sparked bullish trade during the session. As a risk-sensitive currency, this is seeing the ‘Aussie’ gain ground against some peers.
Similarly, the Pound (GBP) is coming under pressure from mixed jobs data. While the unemployment level held at 3.7% in January, wage growth showed signs of falling, leading to pared back rate hike bets.
At the time of writing, GBP/AUD is trading at around AU$1.8272, showing little movement from the morning’s opening rates.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as SVB Collapse Brings Bullish Trade
The Pound Australian Dollar exchange rate is falling this morning, as the ‘Aussie’ benefits from a risk-on mood.
At the time of writing, GBP/AUD is trading around AU$1.8201, a fall of roughly 0.4% from the morning’s opening rates.
Australian Dollar (AUD) Rallies amid Bullish Trade
The Australian Dollar (AUD) is rallying this morning, following the over-weekend collapse of Silicon Valley Bank.
The collapse of SVB sparked risk-on trade, bringing support to the risk-sensitive ‘Aussie’ as markets reacted. Seemingly, the measures taken by the Fed in order to prevent a mass sell-off of Bank funds likely cheered the market mood.
Lee Hardman, Senior Currency Analyst at MUFG Bank, stated:
‘The run on deposits forced SVB to realize losses on their securities portfolios that triggered a further loss of confidence in bank. It has made market participants more aware again that the Fed will eventually break something if it keeps raising rates.’
With this in mind, analysts are paring back their expectations for further hikes. As such, the impact on the global economy from the Fed’s tightening may be lessened, and lead to a less downbeat outlook.
However, the market mood could begin to sour over the course of the day, which may weaken the ‘Aussie’.
Pound (GBP) Muted as Markets Anticipate Budget
The Pound (GBP) is seeing muted trade this morning, as investors await the latest budget from UK Chancellor Jeremy Hunt.
Due Wednesday, the budget will outline the government’s economic policies in the near-term. It will also be accompanied by a five-year growth forecast from the Office of Budget Responsibility (OBR).
With the UK’s economy showing signs of stagnation, investors are hopeful for growth-inspiring measures.
Underpinning the Pound may be the recent collapse of Silicon Valley Bank (SVB). The UK government secured a final-second intervention, brokering a deal for HSBC to buy the UK branch of SVB.
Sold for the princely sum of £1, the takeover may be alleviating market fears of a further collapse, and is saving the finances of several thousand UK customers.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Unemployment Data to Dent GBP?
Looking ahead for the Pound, tomorrow brings two key sets of data which are likely to drive Sterling’s movement.
Firstly, January’s unemployment rate. This is forecast to increase to 3.8%, which may reiterate previous signs of a cooling labour market. If it prints as forecast, Sterling may weaken as the BoE’s tightening appears to take effect on hiring.
Then, the latest wage growth data is due to print. January’s data is forecast to show average earning increases to slow from 5.9% to 5.7%. If this prints accurately, it may result in pared back rate hike bets due to the BoE pointing to wage growth as fuel for inflation.
For the Australian Dollar, overnight tonight the Westpac consumer confidence index is due to print. Forecast to increase to 79.1, the index could lift the ‘Aussie’ by showing improved confidence over March.
However, this could be offset by a fall in business confidence in February, which that index predicted to fall to 5.