Pound Australian Dollar (GBP/AUD) exchange rate slides in risk-on trade
The Pound Australian Dollar (GBP/AUD) exchange rate is on the back foot this morning, as a prevailing risk-on mood, helps to bolster the ‘Aussie’.
At the time of writing the GBP/AUD exchange rate is trading at $1.9255, down roughly 0.3% from this morning’s opening rate.
Australian Dollar (AUD) strengthens on cheery sentiment
The Australian Dollar (AUD) is gaining ground this morning as a positive mood helps to underpin the risk-sensitive currency.
Despite fresh reports that three American soldiers have been killed in Jordan in a drone attack, with reports of at least 34 injured parties, markets are surprisingly cheerful this morning, buoying the ‘Aussie’ against its safer peers this morning.
In an address to the American nation, President Biden commented:
‘Today, America’s heart is heavy. Last night, three US service members were killed – and many wounded – during an unmanned aerial drone attack on our forces stationed in north-east Jordan near the Syria border.’
The US President also vowed to ‘hold all those responsible to account at a time and in a manner our choosing’, stoking concern than tensions in the Middle East could escalate further.
However, investors appear to be taking this in their stride this morning, with expectations for upcoming interest rate cuts from the Federal Reserve helping to cheer market sentiment.
Pound (GBP) quiet amid lull in UK data
The Pound (GBP) is trapped in a narrow range this morning, as a lack of market moving data leaves Sterling to trade without a clear trajectory.
Although the Pound has suffered modest losses against the Australin Dollar and other risk-sensitive currencies, it is firming elsewhere.
However, the Pound’s upside potential remains capped, with GBP investors reluctant to make any aggressive bets in advance of the Bank of England’s (BoE) impending interest rate decision.
GBP/AUD Exchange Rate Forecast: cooling Australian inflation to dent AUD?
Looking ahead, the Pound Australian Dollar exchange rate may drift higher later in the week with the publication of latest Australian inflation data on Wednesday.
Economists forecast inflation will fall from 5.4% to 4.3% in the fourth quarter of 2023. This may undermine the AUD exchange rates as it as it will raise questions about potential interest rate cuts ahead of the Reserve Bank of Australia’s (RBA) February policy meeting.
In the UK, the primary driver of movement for the Pound will likely be Thursday’s Bank of England (BoE) interest rate decision.
With interest rates widely expected to remain unchanged at 5.25%, the focus for GBP investors will be on the bank’s forward guidance.
If the BoE warns that rate cut bets are overdone, then the Pound may surge.