Pound Australian Dollar (GBP/AUD) Exchange Rate Hobbled by Risk-On Mood
(Updated 16:38 01/06/23)
The Pound Australian Dollar (GBP/AUD) exchange rate is losing ground this afternoon. A buoyant risk appetite may be weighing on the pairing today as markets anticipate a slowdown in policy tightening from the US Federal Reserve.
A mixed mood in the commodity markets may also be pushing GBP/AUD higher today. Whilst iron ore has tumbled over the course of the day, the price of coal has recovered from previous lows.
At time of writing the GBP/AUD exchange rate is at around AU$1.9068, which is down roughly 0.3% from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways after Chinese Manufacturing Data
The Pound Australian Dollar exchange rate is trading in a narrow range today. A surprise return to growth in China’s manufacturing sector may be dampening enthusiasm for the pairing today. A downturn in the UK housing market may also be keeping pressure on GBP/AUD.
On the other hand, Bank of England (BoE) rate hike bets may be bolstering GBP/AUD today.
At time of writing the GBP/AUD exchange rate is at around AU$1.9123, virtually unchanged from this morning’s opening figures.
Australian Dollar (AUD) Rallies as China’s Manufacturing Sector Displays Surprise Growth
The Australian Dollar (AUD) is regaining lost ground today after sharp losses earlier in the week. Evidence of a surprise return to growth in China’s manufacturing sector may be boosting the ‘Aussie’ today.
China’s May Caixin manufacturing PMI surprised to the upside overnight. The PM printed a positive reading of 5.9 versus a contraction to 49.5. The data prompted speculation that the Chinese government will introduce further economic stimulus.
Zhou Hao, economist at Guotai Junan International, said:
‘We need more time to see whether the improvement would be sustained, but it is a piece of good news for the Chinese economy. Further policy support is still required to boost domestic demand.’
The risk-sensitive Australian Dollar may also be finding support from a risk-on impulse in the markets today.
On the other hand, a downturn in iron ore prices may be keeping AUD’s gains limited today.
Pound (GBP) Dented by Housing Market Slowdown
The Pound (GBP) is trending lower today. Warning signs from the UK housing market may be weighing on Sterling.
House prices saw a 3.4% year-on-year fall in May of this year, with rising mortgage costs adding to the pressure on the sector. Housing market experts forecast that headwinds for the sector could strengthen if the Bank of England pushes ahead with additional rate hikes.
Nationwide Chief Economist Robert Gardner said:
‘While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected. As a result, investors’ expectations for the future path of Bank Rate increased noticeably in late May.’
Conversely, these BoE bets may be cushioning Sterling’s losses today. A poll of economists by Reuters found a majority of 48 out of the 50 surveyed were forecasting a 25bp hike in June. Additionally, 27 out of 47 of those polled anticipated that rates could climb to 5% by September.
Simon Wells of HSBC said:
‘The UK’s April inflation print was a shocker. That calls for action. Given a data-dependent Bank of England, we now expect two more 25bp rate rises in August and September on top of the one we already expected in June.’
GBP/AUD Exchange Rate Forecast: Will BoE Bets keep Pound Buoyed?
The rest of the week will see thin trading conditions for both currencies amid a sparse data calendar. The Pound could see movement off the back of BoE rate hike bets if markets continue to price in around 100bp of tightening by the end of 2023.
For the Australian Dollar, any additional signs of slowdown in China’s recovery could keep pressure on the currency.
Shifts in the commodity markets may also inspire advances in the ‘Aussie’ over the rest of the week. Iron prices may continue to decline amid signs of lower demand at Chinese steel mills.