Pound Australian Dollar (GBP/AUD) Exchange Rebounds amid Gloomy Trade

Pound Australian Dollar (GBP/AUD) Exchange Rate Volatile amid Risk Aversion

The Pound Australian Dollar (GBP/AUD) exchange rate is clawing back recent losses this morning, as a risk-off mood undermines the Australian Dollar’s (AUD) recent gains.

At the time of writing the GBP/AUD exchange rate is trading at AU$1.9108, having recouped all of its overnight losses.

Australian Dollar (AUD) Sheds Post-Inflation Gains

The Australian Dollar has relinquished its recent gains this morning as risk aversion stifles AUD’s post-inflation upside.

Overnight, Australia’s latest inflation data exceeded forecasts. While inflation in the third quarter cooled from 6% to 5.4%, September’s reading showed that annual inflation had accelerated from 5.2% to 5.6%, above expectations of 5.4%.

Quarter-on-quarter, inflation rose from 0.8% to 1.2%.

Economists continue to speculate that the Reserve Bank of Australia (RBA) may raise interest rates in their November meeting, with major Australian banks expecting further rate hikes. Amid hawkish commentary from Michele Bullock, RBA Governor, tightening of monetary policy appears to be a focal point for the central bank.

During her first speech as Governor, Bullock indicated that a rate hike remains a likely possibility:

‘The [RBA] board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation’.

While a rate hike certainly seems likely, the ‘Aussie’ is vulnerable to risk-sentiment today. Cautious trade has seen the risk-sensitive Australian Dollar shed its overnight gains as anxious investors opt for safer currencies.

Pound (GBP) Quiet amid Lack of Data

The Pound (GBP) is trading without a clear direction this morning amid a lack of fresh UK data.

Sterling looks to be fluctuating in the wake of yesterday’s declining employment growth readings and bleak UK PMIs. Continued signs of slowing activity are highlighting the widening cracks in the UK economy and fuelling domestic recession anxieties.

Amid dismal UK growth data, Britain’s economic outlook remains feeble, with expectations of a continued interest rate hold from the Bank of England (BoE).

Thomas Pugh, an economist at RSM, affirms that slow UK growth is likely to impact interest rate decisions:

‘If this weakness is reflected in the official data over the next few months, it would suggest that the Monetary Policy Committee’s job is largely done; and keeping interest rates at current levels will be sufficient to bring inflation back to the 2% target’.

Pound Australian Dollar Exchange Rate Forecast: Hawkish Messaging to Drive AUD Movement?

Amid a lack of notable Australian data in the coming days, AUD investors may look to this evening’s RBA speeches for any signs of a potential interest rate hike in the central bank’s looming decision.

RBA Governor Michele Bullock and Assistant Governor Christopher Kent are due to speak tonight.  Bullock’s most recent speech struck a hawkish tone, boosting RBA rate hike bets. The ‘Aussie’ may well continue catching bids if this tone is carried forward into tonight’s commentary.

Looking to the UK, a lack of data may leave the Pound vulnerable to risk sentiment. As geopolitical tensions rise in the Middle East investors may opt for safer currencies in place of the increasingly risk-sensitive Pound. However, as the Australian Dollar is considered even riskier than the Pound, a gloomy mood could support GBP/AUD.

Yasmine Arasteh

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