Pound Australian Dollar (GBP/AUD) Exchange Rate Stays Low despite Upbeat Market Mood
Article updated 15:30, 25/7/23
The Pound Australian Dollar (GBP/AUD) exchange rate is remaining weak this afternoon, as the elevated levels of risk appetite favour the Australian Dollar (AUD).
The momentum seen earlier today and yesterday is serving to carry the ‘Aussie’, as investors bet on fresh stimulus from the Chinese government. As a Chinese proxy currency, this stimulus would pay dividends for AUD.
However, these gains may be being trimmed by caution ahead of the imminent Australian inflation data. Most metrics are forecast to show a continued cooldown, which could mollify the ‘Aussie’.
At the time of writing, GBP/AUD is trading at around AU$1.8945m falling by around 0.45% from the morning’s opening rates.
Original article continues below:
Pound Australian Dollar Exchange Rate Slides amid Hopes for Chinese Stimulus
The Pound Australian Dollar exchange rate is weakening this morning, as continued hopes for Chinese economic stimulus propels AUD.
At the time of writing, GBP/AUD is trading at around AU$1.8961, falling by just under 0.4% from the morning’s opening rates.
Australian Dollar (AUD) Soars amid Continued Chinese Stimulus Hopes
The Australian Dollar is climbing this morning, with the cheery market mood boosting the risk-sensitive currency.
Optimism is abound over the potential of further economic stimulus from the Chinese government, as they move to spark growth. The Chinese state news agency Xinhua stated that the Politburo would step up economic policy adjustments, focusing in on domestic demand.
Erin Xin, Greater China Economist at HSBC, commented:
‘The overall stance remains in a pro-growth mindset, but the focus is more forward-looking with an increased emphasis on addressing structural challenges (i.e. local government debt) to facilitate longer-term sustainable growth. It keeps a supportive tone, which can help provide some support for the recovery and it may provide some boost to market sentiment’
Owing to the ‘Aussie’s nature as a Chinese proxy-currency, it is likely enjoying extra tailwinds from the potential stimulus.
Pound (GBP) Buoyed by Risk-On Trade
The Pound (GBP) is enjoying support thus far this morning, with investors appearing to buy the dip after previous losses.
The UK’s economic outlook remains gloomy at best following yesterday’s PMI releases, which pointed to a near stall.
Furthermore, the heightened levels of inflation and high interest rates are continuing to bear down on the UK economy. Demand is also slowing throughout the UK, as consumers struggle with the cost-of-living crisis.
Similarly, rate hike bets are dissipating around Sterling as economists now anticipate a smaller 25bps hike at August’s meeting.
However, as an increasingly risk-sensitive currency, the Pound is taking advantage of this morning’s increased levels of risk appetite. The upbeat market mood is bringing tailwinds, propelling GBP against safer assets such as the US Dollar (USD) and Euro (EUR).
GBP/AUD Exchange Rate Forecast: CBI Data to Drive Sterling?
Looking ahead, later this morning the Confederation of British Industry (CBI) are set to release a duo of data. The industrial trends orders for July are forecast to increase to -12 from -15, which may do little for Sterling by remaining in downbeat territory.
However, a sharp increase in business optimism for Q3, from -5 to 2, may strengthen Sterling through today’s session.
For the Australian Dollar, tomorrow brings the release of the latest inflation data. A sharp cooldown is expected for Q2’s reading, falling from 7% to 6.2%. If this prints inline with forecasts, the ‘Aussie’ could weaken as it may diminish rate hike bets.
Similarly, trepidation towards the release could trim the ‘Aussie’s gains over the course of today’s session. Traders may move to recalibrate their bets on further tightening from the Reserve Bank of Australia (RBA) as we get closer to the release.