Pound Australian Dollar (GBP/AUD) Exchange Rate Slips amid Risk-On Trading
(Updated 16:35 28/03/23)
The Pound Australian Dollar (GBP/AUD) exchange rate has continued to edge lower over the course of the day. A persistent risk-on mood may be weighing on the pairing today.
A rise in coal and iron ore prices may also be weighing on the exchange rate today. However, the Reserve Bank of Australia’s (RBA) dovish tilt may be limiting losses for GBP/AUD.
At time of writing the GBP/AUD exchange rate is at around AU$1.8409, which is down roughly 0.3% from this morning’s opening figures.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Weakens amid Riskier Trading
The Pound Australian Dollar exchange rate is falling today. A return of global risk appetite may be pulling the pairing lower.
Evidence of persistent price pressures on UK households may also be keeping pressure on GBP/AUD. On the other hand, cooler Australian retails sales data may be limiting losses for the pair.
At time of writing the GBP/AUD exchange rate is at around AU$1.8421, which is down roughly 0.2% from this morning’s opening figures.
Pound (GBP) Slips as Grocery Price Inflation Hits New Record-High
The Pound is trending lower today. Evidence of soaring grocery price inflation could be limiting Sterling’s appeal to investors.
Data released today indicated that British grocery inflation rose to fresh record-high of 17.5% in March. The price of eggs, milk, and cheese saw the most rapid price increases. The prospect of reduced spending power for UK households may be denting confidence in GBP today.
Sterling may be underpinned today by hawkish comments from Bank of England (BoE) Governor Andrew Bailey. Speaking at the London School of Economics (LSE) on Monday night, Bailey signalled that the BoE would push ahead with further interest rate hikes if necessary.
Australian Dollar (AUD) Pushed Higher by Risk-On Market Mood
The risk-sensitive Australian Dollar (AUD) is potentially being lifted by a risk-on mood today. A positive mood in the commodity markets may also be lending support to the ‘Aussie’.
AUD may be seeing its gains capped by lacklustre retail sales data today. February’s sales volumes rose by 0.2% which was down drastically from 1.8% increase in January. The growth was above the 0.1% forecast, however.
The data also added to speculation that the Reserve Bank of Australia’s (RBA) series of aggressive rate hikes are bringing down demand.
The prospect of fewer future interest rate increases may also be weighing on the Australian Dollar today. Additionally, bets may be muted in this regard ahead of CPI data on Wednesday.
Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics, said:
‘The RBA are moving into a phase where policy decisions are lineball and each data point on household spending and the labor market will be closely scrutinised.’
GBP/AUD Exchange Rate Forecast: Will Upward GDP Revision Boost Pound?
Looking to the rest of the week for Sterling, a speech from BoE policymaker Catherine Mann on Wednesday could prompt additional losses in the currency. Investors will be looking for any hints regarding the central bank’s forward policy. Signals of an imminent slowdown from the BoE could weigh on GBP.
However, the Pound could reverse some its losses on Friday if the final reading of fourth quarter GDP data prints as expected. Current forecasts are for the data to be revised higher, indicating a stagnation in the UK’s economy rather than a contraction. GBP could benefit from the possibility that the UK dodged a recession in 2022.
For the Australian Dollar, the monthly CPI indicator on Wednesday could have a mixed effect on AUD if the data prints as expected. February’s consumer price index is set to ease to 7.1% which may reduce the chances of further RBA rate hikes.
The possibility of a soft landing for the Australian economy could limit any losses for the ‘Aussie’, however.
Finally for AUD, the latest private sector data for China could strengthen the currency if it prints as forecast. PMIs for March are expected to remain in positive territory, pointing to a continued recovery in the world’s second-largest economy.