Pound Australian Dollar (GBP/AUD) Exchange Rate Slips on Strong Trade Data and Upbeat Sentiment
The Pound Australian Dollar (GBP/AUD) exchange rate retreated from a two-week high overnight amid a risk-on mood and stronger Australian trade data.
At the time of writing, GBP/AUD is trading at around AU$1.9120, down 0.3% from last night’s two-week high.
Australian Dollar (AUD) Rallies as Exports Jump
After striking a near two-week low yesterday evening, the Australian Dollar (AUD) then rallied overnight.
One key factor boosting the ‘Aussie’ Dollar’s appeal was Australia’s latest trade data. The country’s trade surplus grew more than forecast in August, from AU$7.32bn to AU$9.64bn, thanks to an impressive 4% increase in exports.
As trade is an important part of Australia’s economic mix, the new data cheered AUD investors.
In addition, an upbeat market mood sparked interest in the risk-sensitive ‘Aussie’. After US employment data missed forecasts yesterday, investors were hopeful that the Federal Reserve may not raise interest rates any higher, meaning lower global borrowing costs and a healthier world economy.
This morning, the Australian Dollar trimmed its gains but is still holding strong. While the market mood has wavered slightly, it remains broadly upbeat.
Pound (GBP) Stumbles as Post-PMI Hopes Wear Off
Meanwhile, the Pound’s (GBP) strength after yesterday’s better-than-expected PMI result seems to have fizzled out.
The UK’s services PMI for September printed above preliminary estimates yesterday, coming in at 49.3 versus 47.2. This gave Sterling a boost, but the British currency has failed to sustain the upside.
Investors remain deeply concerned about the UK’s economic outlook. Although the PMI was revised higher, it still showed service sector activity contracting at its fastest pace in eight months.
Furthermore, it indicated a slowdown in hiring activity and easing inflationary pressures. While this is positive news for the UK economy, it is negative news for the Pound, as it decreases the likelihood of more interest rate hikes from the Bank of England (BoE).
After yesterday’s knee-jerk reaction to the PMI, GBP investors seem in a far more sombre mood today.
GBP/AUD Exchange Rate Forecast: Risk Appetite to Drive Movement?
Looking ahead, risk appetite could drive the currency pairing through the remainder of today’s session amid a lack of economic data on both sides. If markets remain bullish, the ‘Aussie’ could climb higher.
New US data could impact investors’ appetite for risk. After the ADP employment change report missed forecasts yesterday, analysts will be keeping an eye on today’s initial jobless claims figure to gauge the health of the American labour market.
An unexpected rise in unemployment benefits claims would add to evidence of a slowing US jobs market. This, in turn, could cheer markets and boost the Australian Dollar.
The non-farm payrolls report on Friday could have a similar impact, meaning we could see some sharp movement in the Pound ‘Aussie’ pair at the very end of the week.
Before then, the Reserve Bank of Australia (RBA) releases its Financial Stability Review overnight. A generally upbeat outlook for Australia could support AUD.