Pound Australian Dollar (GBP/AUD) Exchange Rate Holds onto Gains
The Pound Australian Dollar (GBP/AUD) exchange rate is trading upward in short bursts today, although Pound (GBP) gains are capped by worse-than-expected factory data. Meanwhile, the Australian Dollar (AUD) may be benefiting from increased risk appetite.
At the time of writing, GBP/AUD is trading at A$1.9203, having climbed by approximately 0.16% in the past 24 hours.
Pound (GBP) Firms as GDP Improves
The Pound is climbing against the majority of its peers today, buoyed by positive GDP data and a risk-on mood.
As expected, UK GDP rose for the month of August by 0.2%, after a 0.6% contraction in July. Analysts noted that an increase in services output drove the expansion, although both production and construction output fell as weather events led to delays in planned projects.
Moreover, risk appetite remains strong despite ongoing conflict in the Middle East. Expected growth in the Chinese economy may be partially responsible for bullish market sentiment, as well as observations that the global oil market is currently stable.
Russian Deputy Prime Minister Alexander Novak said earlier today: ‘The OPEC+ mechanism is efficient… OPEC+ cooperation ensures the stability of the oil market and investments.’
Nevertheless, disappointing factory data may be capping GBP gains, preventing the Pound from reaching last Sunday’s highs.
UK industrial production dropped by 0.7% in June – 0.5% more than forecast – while manufacturing production fell by 0.8%. Experts at the Office for National Statistics observed that output had decreased for three of the four industry groups: manufacturing, electricity, gas, steam & air conditioning, and water supply.
Australian Dollar (AUD) Sinks despite Risk Appetite
The Australian Dollar has slumped against its peers so far today, despite strong risk appetite in the currency market.
The latest consumer inflation expectations report printed above expectations during Asian trading hours, according to the Melbourne Institute – yet the data failed to buoy AUD. Climbing expectations for further price hikes can inspire hopes of a hawkish monetary policy intervention.
Yet as October’s measure of consumer predictions printed at 4.8% rather than the 4.4% expected, ‘Aussie’ investors appeared downcast at the prospect of financial instability ahead, rather than hopeful of another interest rate hike.
Traders may be put off from anticipating spontaneous policy tightening from the Reserve Bank of Australia (RBA) by comments made yesterday by the bank’s Assistant Governor Christopher Kent.
Kent told markets that the impact of past rate rises had taken time to be felt but were now beginning to bite: ‘The lags of transmission mean that some further effects of rate increases to date are still to be felt through the economy, which will provide further impetus to lower inflation in the period ahead.’
According to Reuters, traders have recently pared back their rate hike expectations, even with the possibility of another surge in inflation – which has in part to do with the waning likelihood of a hawkish Federal Reserve.
GBP/AUD Exchange Rate Forecast: Chinese Data to Influence Trading?
The Pound Australian Dollar exchange rate may trade tomorrow according to the outcome of several Chinese data releases, given the strong trading relationship between China and Australia.
Inflation in the country is expected to have increased, bringing it closer to its target rate and potentially inspiring tailwinds. China’s trade surplus also looks to climb, which – if it prints as expected – would likely buoy the Chinese Yuan (CNY) and by extension the ‘Aussie’.
Elsewhere, continuing risk appetite could boost the Australian Dollar while also lending support to the Pound against its safe-haven peers. On the other hand, an escalation in the Israel-Palestine conflict may induce a risk-off mood. If this occurs, AUD will likely drop lower.