Pound Australian Dollar (GBP/AUD) Exchange Rate Muted as Mood Remains Risk-On
(Updated 16:21 18/04/23)
The Pound Australian Dollar (GBP/AUD) exchange rate is continuing to trade in a narrow range today. The continued market reaction to the UK wage growth data may be lending support to the pairing.
The data has added to anticipations of further interest rate hikes from the Bank of England (BoE). These bets may be lending additional support to GBP/AUD today.
Ashley Webb, a UK economist at the consultancy Capital Economics, said:
‘The labour market became a bit less tight in February and wage growth continued to ease, albeit slowly. That leaves the Bank of England with a tough call on whether to raise interest rates further.’
A persistent risk-on mood is likely preventing the exchange rate from making any significant gains, however. Markets have remained upbeat following above-forecast Chinese growth figures at the opening of the European session.
At time of writing the GBP/AUD exchange rate is at around AU$1.8473, virtually unchanged from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways amid Risk-On Mood
The Pound Australian Dollar exchange rate is trading in a narrow range today. The pairing may be coming under pressure from upbeat Chinese growth and private sector data, as well as a risk-on mood.
On the other hand, evidence of strong UK wage growth may be preventing drastic losses for the exchange rate.
At time of writing the GBP/AUD exchange rate is at around AU$1.8454, virtually unchanged from this morning’s opening figures.
Pound (GBP) Bolstered by Buoyant Wage Growth
The Pound (GBP) is trading higher today after the release of mixed jobs data. Signs of persistently strong wage growth are likely boosting Sterling today.
Average earning growth including bonuses for February were expected to slip to 5.1% from 5.9% in January. Wage growth remained unchanged at 5.9% in February however, increasing pressure on the Bank of England (BoE) to raise interest rates at their next meeting.
James Smith, developed markets Economist at ING, said:
‘We should caution that one month doesn’t make a trend, though a similar surprise blowout in services inflation due on Wednesday would inevitably move the dial in favour of a 25bp rate from the Bank of England next month.’
Sterling may be seeing healthier gains capped by evidence of some overall slack in the UK labour market, though. Unemployment bucked forecasts of no change in February as it edged higher to 3.8%.
Additionally, the UK added 169,000 jobs to its economy in January. The change was well above forecasts of a 50,000 increase.
Australian Dollar (AUD) Lifted by Better-than-Expected Chinese GDP
The risk-sensitive Australian Dollar (AUD) is climbing today amid a return of global risk appetite. Signs of a better-than-expected recovery in the Chinese economy may be lifting the ‘Aussie’ today.
The world’s second-largest economy grew by a more-than-forecast 4.5% in the first quarter of 2023. Analysts highlighted the strong growth in retail sales as a key factor.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said:
‘The bright spot is consumption, which is strengthening as household confidence improves. The strong export growth in March also likely helped to boost GDP growth in Q1.’
A downturn in iron ore prices could be dampening enthusiasm for the ‘Aussie’, however.
GBP/AUD Exchange Rate Forecast: Will UK Inflation Cooldown see Pound Plummet?
Looking to the remainder of the week ahead for the Pound, a forecast slowdown in March’s rate of inflation could see GBP slip on WednesdayThe figures may also cause markets to reduce their bets on a 25bps hike from the BoE at their May meeting.
Friday is set to bring a range of data for Sterling. On the one hand, March’s retail sales figures may prompt a deeper downturn in the currency. Sales volumes are expected to slump by 0.5% after February’s surprise leap of 1.5%.
On the other hand, output data for the UK’s private sectors could lend support to GBP. April’s PMI are expected to tick higher from their previous reading.
The Australian Dollar may be boosted on Thursday by the latest interest rate decision from People’s Bank of China (PBoC). The PBoC is expected to leave rates unchanged at 3.65% in a bid to bolster the country’s economic recovery.
The ‘Aussie’ could see its gains reversed on Friday if output data for the country’s private sectors prints as forecast. April’s PMIs are set to dip which could dent confidence in AUD.
However, evidence of inflationary pressures on the country’s private sectors could add to fresh bets on RBA rate hikes. This may help to limit losses for the Australian Dollar.