Pound Australian Dollar (GBP/AUD) Exchange Rate Plummets as Risk Appetite Improves
(Updated 16:33 02/06/23)
The Pound Australian Dollar (GBP/AUD) exchange rate is nosediving this afternoon. A persistent risk-on mood could be pulling the pairing lower today.
Markets are gravitating towards riskier assets following the resolution of the US debt ceiling crisis. Additionally, signals today that the Fed may hold interest rates unchanged at its June meeting may also be prompting the return of risk appetite.
Reserve Bank of Australia (RBA) rate hike bets may also be prompting the exchange rate’s downturn today after Australia voted to raise its minimum wage.
At time of writing the GBP/AUD exchange rate is at around AU$1.8846, which is down roughly 1% from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Stumbles amid Risk-On Mood
The Pound Australian Dollar exchange rate is falling today. Renewed bets on further interest rate hikes from the Reserve Bank of Australia may be denting confidence in the pair today.
Additionally, a return of global risk appetite could be pushing GBP/AUD higher.
At time of writing the GBP/AUD exchange rate is at around AU$1.8934, which is down roughly 0.6% from this morning’s opening figures.
Australian Dollar (AUD) Buoyed by RBA Rate Hike Bets as Australia Raises Minimum Wage
The risk-sensitive Australian Dollar (AUD) could be seeing gains off the back of a risk-on mood today. A recovery in iron ore prices may also be buoying the ‘Aussie’.
The currency could be finding additional support from bets on a 25bp interest rate hike from the Reserve Bank of Australia next week. The pricing in comes after news that Australia will be raising its minimum wage by 5.75% amid soaring living costs.
Speaking on the impact of the move on the RBA’s policy, RBC Capital Markets’ Chief Economist Su-Lin Ong said:
‘Following several recent developments, including the outcome of today’s minimum wage decision, we are adding a 25bp hike to our RBA profile in June and another 25bp in July.’
Pound (GBP) Muted amid Speculation on Further BoE Tightening
The Pound (GBP) is treading water today amid thin trading conditions. Sterling could continue to be underpinned by bets on Bank of England interest rate increases.
Markets are pricing in roughly 100bp of policy tightening by the end of 2023 from the central bank.
These aggressive bets are seeing pushback from some experts, however.
James Smith, ING’s Developed Markets Economist, said:
‘Investors think Bank Rate could rise another 100 basis points following some shock inflation data. But there are also broader signs that wage and price pressures are slowly easing, which suggests one or perhaps two more rate hikes will prove sufficient.’
GBP/AUD Exchange Rate Forecast: Will RBA Surprise with another Shock Rate Hike?
Looking to the coming for the Australian Dollar, private sector data for both Australia and China could boost the ‘Aussie’ on Monday. The final reading of Australia’s May services PMI is expected to remain in positive territory for the second consecutive month.
Similarly, the latest services PMI for China is forecast to indicate growth in the sector for the fifth consecutive month.
AUD investors will be keenly awaiting the RBA’s latest interest rate decision on Tuesday. Whilst the central bank is currently forecast to keep interest rates steady, the Reserve Bank of Australia surprised markets with a rate hike last month. The ‘Aussie’ could leap in response.
Wednesday’s GDP growth data could also see the Australian Dollar surge in response to the data. First quarter growth figures are expected to slow slightly but post gains for the Australian economy.
Finally, for the ‘Aussie’, Chinese inflation figures on Friday could also lend support to the ‘Aussie’. China’s May inflation rate is forecast to edge higher which may help to limit fears of disinflation in the country.
For the Pound, the final reading of May’s services PMI could have a mixed effect on the currency on Monday. The data is expected to be revised slightly lower which may dent confidence in Sterling.
Tuesday’s retail sector figures could prompt additional gains for Sterling if they print as forecast. May’s sales volumes are set to increase to 5.4%.