Pound Australian Dollar (GBP/AUD) exchange rate subdued following UK GDP
The Pound Australian Dollar (GBP/AUD) exchange rate is trapped in a narrow range this morning despite a positive UK GDP report.
At the time of writing the GBP/AUD exchange rate is trading at $1.9354, virtually unchanged from this morning’s opening rate.
Pound (GBP) rangebound despite renewed economic optimism
The Pound (GBP) is trading sideways this morning following the UK’s latest GDP report.
Domestic GDP figures for January reported that the UK returned to growth at the beginning of 2024, boosting hopes that the UK’s recession in the second half of 2023 will prove to be short lived.
The data came in at 0.2%, rising from December’s 0.1% contraction, and printing in line with market expectations.
Although the latest figures confirmed a rise in UK GDP, closer analysis showed that the headline figure wasn’t as strong as it initially appeared.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, said:
‘The news that the economy expanded by 0.2% month-on-month in January suggests the UK economy may already have moved out of recession and implies there is some upside to our 2024 GDP growth forecast of 0.0%. That said, elsewhere the figures were more disappointing. Output in the industrial sector fell by 0.2%. And further strike action dampened output in the transport, health and film/TV production sectors.’
Concerns over the ‘disappointing’ figures and the underlying health of the UK economy have limited the Pound’s potential upside today.
Australian Dollar (AUD) flat amid absence of data
The Australian Dollar (AUD) is treading water against the majority of its peers this morning amid a lack of domestic data.
This has left the risk-sensitive ‘Aussie’ trading on market sentiment, with this morning’s cheery mood offering AUD exchange rates some modest support.
Despite a stronger-than-expected US inflation print on Tuesday, markets are still pricing in a Federal Reserve interest rate cut to arrive in June, leaving investor’s betting on riskier currencies today.
The CME FedWatch Tool now estimates the probability of a Fed rate cut in June to be 66%.
GBP/AUD exchange rate forecast: market dynamics to drive GBP and AUD?
Looking ahead, the primary catalyst of movement for the Pound Australian Dollar exchange rate for the remainder of the week is likely to be risk appetite.
With UK data in short supply, GBP exchange rates will likely be driven by market sentiment, and could be bolstered by a bout of cheery trade on the back of its position as an increasingly risk-sensitive currency.
Turning to the Australian Dollar, domestic data is also in short supply for the majority of the week, until Friday which will see the release of the latest consumer inflation expectations.
Forecast to slightly ease, should the data confirm consumer inflation expectations decreased from 4.5% to 4.4% in March, this may undermine AUD exchange rates at the end of the week.