Pound Australian Dollar (GBP/AUD) Exchange Rate Flattens amid Cheery Market Mood
(Article updated 08:48, 14/7/23)
The Pound Australian Dollar (GBP/AUD) exchange rate is trading in narrow boundaries this morning, as yesterday’s bullish market mood supports the pairing.
However, as the Australian Dollar (AUD) is more risk sensitive, the Pound (GBP) is unable to gain a clear advantage.
Continued bets on further tightening from the Bank of England (BoE) are likely contributing some tailwinds to Sterling this morning, amid a light data calendar.
At the time of writing, GBP/AUD is trading at around AU$1.9082, showing little movement from the morning’s opening rates.
Original article continues below:
Pound Australian Dollar Exchange Rate Stumbles on UK GDP Contraction
The Pound Australian Dollar exchange rate is weakening this morning, following the news that the UK’s economy shrank in May.
At the time of writing, GBP/AUD is trading at around AU$1.9054, a fall of just over 0.3% from the morning’s opening rates.
Pound (GBP) Wavers as GDP Contracts
The Pound (GBP) is wavering this morning, following the release of May’s GDP data.
While exceeding forecasts of a 0.3% contraction, the UK economy still shrank by 0.1% on a monthly basis, sparking recession anxieties.
The predominant thinking is that the UK’s economic outlook is growing less-than-upbeat, with many economists expecting further downturn. Inflation remains stubbornly high in the UK, creating an increasingly narrow tightrope for the Bank of England (BoE).
Neil Birrell, Chief Investment Officer at Premier Miton Investors, commented:
‘As expected, the UK economy shrank in May, but not as much as expected. Admittedly, we are a month on from that now and the economy could be weaker still, but this would not have been the picture the Bank of England wanted to see. With inflation still rife, this keeps the pressure firmly on the Bank to keep raising interest rates, putting even more pressure on the consumer in particular.’
However, the upbeat market mood could be working in tandem with the better-than-forecast print to null cushion Sterling from significant losses.
Australian Dollar (AUD) Surges amid Bullish Market Mood
The Australian Dollar (AUD) is climbing this morning, despite a set of mixed Chinese economic data. Owing to its risk sensitive nature, the bullish market mood is allowing AUD to shrug off the mixed picture.
On the back of yesterday’s sharp cooldown in American inflation, the consensus has grown that the Federal Reserve’s next rate hike would be the last. The global economic outlook appears a touch rosier, leading to the upbeat trade seen this morning – thus propelling the ‘Aussie’.
However, these gains may be being tempered by a sharp drop in Chinese exports. Over June, exports fell further than forecast by 12.4% on a yearly basis. These figures may have sparked concerns over the economic superpower’s outlook, as the post-Covid recovery continues to stall.
GBP/AUD Exchange Rate Forecast: Market Sentiment to Shape Pairing?
Looking ahead for the Pound (GBP), macroeconomic data releases are thin on the ground through to the end of the week.
Because of this, continued analysis of the latest GDP data is likely to be the main driver of movement. If investors remain concerned about the UK’s economic outlook, Sterling could struggle for support.
Similarly, the Australian Dollar is set to go wanting for data catalysts. As a more risk sensitive currency, shifts in risk appetite are more likely to impact the ‘Aussie’.
If bullish trade colours the session, AUD rates could strengthen against safer peers. However, a decline in risk appetite may weigh heavily on the ‘Aussie’.