Pound Australian Dollar (GBP/AUD) Exchange Rate Softens as AUD Enjoys Risk-On Market Mood

Pound Australian Dollar (GBP/AUD) Exchange Rate Weakens amid Upbeat Market Mood

The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning, as an optimistic market mood benefits the ‘Aussie’.

At the time of writing, GBP/AUD is trading around AU$1.8073, a decline of around 0.3% from the morning’s opening rates.

Australian Dollar (AUD) Rallies amid Upbeat Trade

The Australian Dollar (AUD) is strengthening this morning, as risk-on trade carries through the session.

Yesterday, the US based First Republic Bank became caught up in the unfurling crisis across the banking sector. However, larger US banks injected US$30 billion in deposits, preventing a collapse. This has soothed market jitters, and is inspiring the bullish trade currently lifting the ‘Aussie’.

Yeap Jun Rong, Market Analyst at IG, commented:

‘Following the recent global financial instabilities, First Republic Bank was expected to be the next domino to fall. But an industry-wide rescue to shore up the bank’s finances provided some much-needed reassurances to mitigate further banking jitters.’

Furthermore, the People’s Bank of China (PBOC) announced that they would cut bank’s reserve ratio to spur further growth. To accomplish this, the PBOC has cut rates by 25bps with the goal to keep liquidity flowing and lower funding costs for businesses.

Because of this, the Chinese proxy-currency may be enjoying bonus tailwinds as the economic superpower continues to advance.

Pound (GBP) Underpinned by UK Banking Sector Relief

The Pound (GBP) is seeing mixed trade this morning, as the upbeat market mood prevents it from gains against riskier assets.

However, analysts expect that the UK’s banking sector may be more secure than others, with potential contagion seeming less likely. This positivity may be bringing a tailwind to GBP trade this morning.

Richard Hunter, Head of Markets at interactive investor, commented:

‘The general waves of relief also washed over to UK shores, with the main indices again reflecting a more positive frame of mind for now. Banks recovered some of the losses of the last week, although there remains some way to go.’

Furthermore, underpinning Sterling could be bets on interest rate increases from the Bank of England (BoE). Following on from yesterday’s 50bps rate hike from the European Central Bank (ECB), analysts are expecting a 25bps hike from the BoE.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: RBA Minutes to Boost AUD?

Looking ahead to early next week for the Australian Dollar, the Reserve Bank of Australia (RBA) are due to publish their latest meeting minutes. Overnight on Monday, investors will likely scour the minutes hoping for hints of further interest rate hikes.

If the minutes strike a hawkish tone, the ‘Aussie’ could rally on elevated rate hike bets. However, if they discuss a pause, then AUD could dip.

For the Pound, the data docket is rather empty at the start of next week. Because of this, Sterling is likely to be vulnerable to market sentiment. Due to the recent, and continuing, turmoil across US and European banks, a souring market mood could weigh on GBP.

John Mulcahey

Contact John Mulcahey

Do Not Sell My Personal Information