Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs Higher as Market Mood Sours
Article updated 16:30, 3/10/23
The Pound Australian Dollar (GBP/AUD) exchange rate is climbing higher this afternoon, as the market mood sours.
As a more acutely risk-sensitive currency, the ‘Aussie’ is weakening amid signs that the Federal Reserve has room to continue hiking interest rates. This is damaging the market mood as it could have negative consequences for global economic growth.
Furthermore, following the Reserve Bank of Australia’s (RBA) pause this morning, investors have likely continued to pare back their expectations of future tightening.
At the time of writing, GBP/AUD is trading at around AU$1.9172, rising by just under 0.8% from the morning’s opening rates.
Original article continues below:
GBP/AUD Exchange Rate Rises as RBA Pauses Again
The Pound Australian Dollar (GBP/AUD) exchange rate is strengthening this morning, following another pause from the Reserve Bank of Australia (RBA).
At the time of writing, GBP/AUD is trading at around AU$1.9138, rising by roughly 0.7% from the morning’s opening rates.
Australian Dollar (AUD) Crumbles as RBA Extends Tightening Pause
The Australian Dollar (AUD) is sliding this morning, following the fourth consecutive rate hold from the Reserve Bank of Australia.
While this was in line with market expectations, the RBA’s accompanying guidance did little to aid the ‘Aussie’.
The new RBA Governor, Michele Bullock, stated:
‘Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks. The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.’
While the door is open for additional tightening later in the year, AUD investors seem unconvinced. Recent consumer price indexes have suggested an uptick in inflation, owing to volatility in fuel prices.
Furthermore, the risk-averse market mood is likely exerting additional pressure on the ‘Aussie’, due to its acute risk-off nature.
Pound (GBP) Directionless amid Short Supply of Data
The Pound (GBP) is trading without much direction this morning, as a continued data drought saps sentiment towards Sterling.
Additionally, the UK’s economic outlook is remaining the focus among investors due to a lack of other data. With the UK economy seeming to be circling the drain compared to other territories, investors appear unwilling to invest in GBP.
Furthermore, the Bank of England (BoE) may have concluded its tightening cycle with the recent pause. Recent competition amongst grocers to lower prices appears to have contributed to cooling food inflation.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium, commented that:
‘Customers who bought dairy, margarine, fish and vegetables – all typically own-brand lines – will have found lower prices compared to last month. Households also benefitted from price cuts for school uniforms and other back-to-school essentials.’
Pound Australian Dollar Exchange Rate Forecast: Confirmation of Service Sector Woes to Dent GBP?
Looking ahead for the Pound, tomorrow brings the publication of the final service sector index, reflecting September’s activity.
If this confirms further weakness in the vital sector, the Pound may struggle to attract support. Additionally, this may lead to investors further paring back their bets on interest rate hikes from the Bank of England.
For the Australian Dollar, the core catalyst of movement is likely to be the release of August’s trade data on Thursday. As an export driven economy, news of an expanded trade surplus could bolster the ‘Aussie’.
Elsewhere, risk appetite is likely to play a role in shaping GBP/AUD. If the market mood improves, the ‘Aussie’ could overtake Sterling due to its more risk-sensitive nature.