Pound Australian Dollar (GBP/AUD) Exchange Rate Flat amid Downbeat Market Mood

Pound Australian Dollar (GBP/AUD) Exchange Rate Levels amid Souring Market Mood

Article updated 16:25, 7/9/2023:

The Pound Australian Dollar (GBP/AUD) exchange rate is levelling out this afternoon, as a souring market mood mutes AUD.

Strong US jobs data brought support to the US Dollar (USD), and left room for further interest rate hikes. This, in turn, is serving to weigh on global growth prospects and is prompting risk-off trade.

With the Pound being increasingly risk-sensitive and the ‘Aussie’ being emphatically so, this is yielding a narrow trading range for the pairing.

At the time of writing, GBP/AUD is trading at around AU$1.9572, showing little movement from the morning’s opening rates.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Weakens amid Hawkish Final Speech from RBA Governor Lowe

The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning. The weakness follows on from a hawkish final speech from Reserve Bank of Australia (RBA) Governor Philip Lowe.

At the time of writing, GBP/AUD is trading at around AU$1.9536, falling by just under 0.3% from the morning’s opening rates.

Australian Dollar (AUD) Cushioned by RBA Lowe Speech

The Australian Dollar (AUD) is enjoying modest support this morning, as a speech from Reserve Bank of Australia Governor Phillip Lowe prompts a rebound.

Earlier, the ‘Aussie’ began to slide on the back of disappointing Chinese and Australian trade data. Both figures showed that trade surpluses in both countries had narrowed more than expected.

Furthermore, Australian goods and services exports declined by 2% on a monthly basis, further weighing on the ‘Aussie’.

However, RBA Lowe’s final speech as Governor left the door open for further rate hikes, should inflation prove sticky.

He stated:

‘While recent data provide some comfort on this front, we need to remain alert to this risk for if it were to materialise, inflation would become sticky, which would require tighter monetary policy and more economic pain later on.’

With this in mind, bets on further interest rate hikes may have served to cushion the ‘Aussie’ despite the downbeat trade data.

Pound (GBP) Struggles as House Prices Slump

The Pound (GBP) is struggling to attract support this morning, as a lack of impactful macroeconomic data shifts the focus to domestic turbulence.

House prices were found to have slumped by 4.6% on an annual basis in August, reflecting the largest year-on-year decrease since 2009.

The Bank of England’s (BoE) historically aggressive tightening cycle was seen to be the likely cause. With falling house prices being considered a sign of recession, the UK’s economic outlook may be further darkening.

Tomasz Wieladek, Chief European Economist at T Rowe Price, explained:

‘With wage and price inflation still very high, the Bank of England will not come to the rescue any time soon, as it needs greater slack in the labour market to squeeze wage inflation out of the economy. Instead, rates are more likely to keep rising given the latest inflation data.’

Pound Australian Dollar Exchange Rate Forecast: Light Data Calendar to Limit Pairing?

Looking ahead for the Pound, data releases are set to be in short supply in the near term.

Because of this, Sterling may be exposed to shifts in risk appetite, and to analysis of the UK’s economic outlook.

If investors continue to consider the poor outlook, Sterling may struggle to attract support during the session. Similarly, due to its increasingly risk-on nature, bearish trade could weaken GBP rates.

The Australian Dollar may also struggle to find a clear direction tomorrow, as the data calendar remains empty. Attention may turn to China’s imminent inflation data, which economists forecast to print at 0.1% for August.

If this prints accurately, AUD could strengthen as it would indicate that the economic superpower is managing to avoid deflation.

John Mulcahey

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