Pound Australian Dollar (GBPAUD) Exchange Rate Hits Monthly Low during Upbeat Market Mood 

Pound Australian Dollar (GBP/AUD) Exchange Rate Tanks as Risk Appetite Improves  

The Pound Australian Dollar (GBP/AUD) exchange rate is tumbling this morning after the Federal Reserve’s interest rate decision sparked upbeat trade.

At the time of writing the GBP/AUD exchange rate is trading at AU$1.8923, down approximately 0.4% from this morning’s opening rate.

Australian Dollar (AUD) Rebounds amid Cheery Trade

The Australian Dollar (AUD) is gaining ground this morning as improving risk appetite sweeps across global markets.

The ‘Aussie’ is strengthening rapidly in the wake of the Federal Reserve’s monetary policy decision. The Fed’s interest rate hold last night triggered a spell of positive trade, benefitting the risk-sensitive Australian Dollar.

Although Fed Chair Jerome Powell left the door open to another interest rate hike by the end of the year, he also said that the risks were ‘more two sided’ and ‘balanced’. Markets took this to mean that another rate hike was highly unlikely, with investors then celebrating the apparent end of the Fed’s tightening cycle.

The strength in the ‘Aussie’ comes despite downbeat trade data overnight. . The latest balance of trade reported that Australia’s trade surplus has narrowed sharply, falling far below expectations of AU$9.4 billion to AU$6.786 billion.

As trade is a vital part of Australia’s economic mix, a steep drop in exports may trim AUD’s gains as today’s session continues.

However, if a firmly bullish mood continues to permeate markets throughout the day, AUD could remain an investor favourite.

Pound (GBP) Slips Ahead of BoE Monetary Policy Decision

The Pound (GBP) is mixed this morning ahead of the Bank of England’s (BoE) key interest rate decision later today.

An upbeat market mood has helped the increasingly risk-sensitive Pound to firm against its safer peers this morning. However, the cheery sentiment is seeing Sterling fall notably against the riskier Australian Dollar

In addition, GBP investors continue to refrain from placing aggressive bets in anticipation of the BoE rate decision.

Bleak data in recent weeks has fuelled concerns of a UK economic slowdown, in turn denting BoE rate hike bets.

Steve Matthews, Liquidity Fund Manager at Canada Life Asset Management, noted:

‘UK Manufacturing PMI and employment data indicate a generally weakening economy and, as such, we expect the BoE to judge this as a precursor to inflation falling as previous hikes take hold’.

Policymakers may want to wait to see the effects of previous hikes hitting the economy before delivering impactful changes to monetary policy. This caution is leaving GBP to stumble as investors prepare for the possibility of another hold.

Pound Australian Dollar Forecast: BoE Interest Rate Decision to Dent GBP?

Turning to tomorrow, the UK’s finalised services PMI is due out. With a marginal decline forecast in the vital services sector, GBP could soften. However, unless the finalised data deviates significantly from last week’s preliminary readings, the PMI may have little impact on the Pound’s movements.

Australia’s retail sales data for September is also due out tomorrow. An expected fall from 0.3% to -0.2% may see the ‘Aussie’ shed its current gains.

China’s Caixin services PMI is then due out on Friday. Australia’s status as a proxy currency for the Chinese economy could mean that an expected uptick in October’s services PMI could help underpin AUD’s recent wins.

Yasmine Arasteh

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