Pound Australian Dollar (GBP/AUD) Exchange Rate Extends Recovery
(Updated 16:40, 14/07/23) The Pound Australian Dollar (GBP/AUD) exchange rate continued to climb this afternoon, extending its recovery.
The Australian Dollar (AUD) came under pressure as the recent rally in markets lost its momentum, leaving the risk-sensitive ‘Aussie’ lacking support.
Meanwhile, the Pound (GBP) is underpinned by hawkish Bank of England (BoE) bets. Sterling has shrugged off recession fears to strengthen this week, as markets are pricing in another 50bps hike at the BoE’s next meeting.
At the time of writing, the GBP/AUD exchange rate is trading at AU$1.9142, up 0.4% on the day.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Ticks Higher amid Growing Market Caution
The Pound Australian Dollar (GBP/AUD) exchange rate is recouping some losses this morning, having hit a one-week low earlier in this week’s session, as the recent risk-on rally fades.
At the time of writing, GBP/AUD is trading at AU$1.9075, having wavered marginally higher this morning.
Australian Dollar (AUD) Pares Gains amid Receding Risk Appetite
The Australian Dollar (AUD) is trimming its gains today, having enjoyed a significant risk-on rally this week.
The risk-sensitive ‘Aussie’ rocketed higher amid hopes that the US Federal Reserve will not raise interest rates as high as expected. This, in turn, will mean less strain on the global economy.
Today, however, the market mood is a little more mixed. The initial optimism following cooler US inflation data is wearing off, and investors are becoming a little more cautious.
Perhaps adding to the tepid mood, a UN report today highlighted rising global poverty and higher debt servicing costs for developing countries.
The report is a reminder of the precarious position the global economy is in. While the prospect of less tightening from the Fed is certainly a good thing, the outlook is still very challenging.
Pound (GBP) Underpinned by BoE Bets
Meanwhile, the Pound (GBP) is edging higher against the ‘Aussie’ today amid the less upbeat market mood.
Although Sterling has weakened against the Australian Dollar through the second half of this week’s session, it’s still historically strong, having hit a three-year high earlier in the week.
Underpinning the Pound are market expectations that the Bank of England (BoE) will raise interest rates by 50bps at its policy meeting next month. UK inflation remains persistently high and wages are growing at a record pace.
These hawkish bets have kept up a consistent demand for the Pound, and GBP is edging higher against AUD today.
GBP/AUD Exchange Rate Forecast: Souring Sentiment to Boost the Pound?
Looking ahead, risk appetite could drive the GBP/AUD pairing today. If the tone turns increasingly bearish, the safer Pound could climb higher against the risk-sensitive Australian Dollar.
Sterling could find its gains capped, however, amid worries about ongoing strike action in the UK. Although Prime Minister Rishi Sunak announced a 6% pay rise for public sector workers yesterday, junior doctors are still on strike.
Workers at Gatwick Airport have also taken industrial action, ushering in eight days of disruption at the beginning of the busy summer holiday period.
Strikes have caused economic damage to the UK, and investors also dislike social and civil instability. As a result, news of ongoing industrial action could cap the Pound.
Looking to next week, the session kicks off with China’s GDP growth rate for the second quarter. Economists expect a significant slowdown in growth, which could sour the market mood and send the ‘Aussie’ spiralling lower.
More high-impact events are due as the week unfolds, including the Reserve Bank of Australia (RBA) meeting minutes, UK inflation, Australian labour market data and British retail sales. Next week could see notability GBP/AUD volatility.