Pound Australian dollar (GBP/AUD) exchange rate plummets amid risk-on flows
(Updated 16:15, 22/04/22) The pound Australian dollar (GBP/AUD) exchange rate tumbled as the session progressed, as risk-on flows and fading support for Sterling saw the ‘Aussie’ surge.
After slumping against the highly risk-sensitive Australian dollar (AUD) this morning, the pound (GBP) has since plummeted against its riskier rivals. With upbeat trading conditions extending into the latter part of the European trading session, AUD surged against its safer peers.
In addition to this, a lack of notable macroeconomic releases, ramped in Bank of England (BoE) interest rate hike bets left Sterling to face headwinds against it major peers.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, said:
‘London’s blue-chip index has had a surge of power as heightened geopolitical tensions have eased, and investors assessed the brighter prospects for the UK economy, with interest rate cuts spied on the horizon.’
At the time of writing, GBP/AUD is trading at AU$1.9158. This is down from AU$1.92212 this morning, having slumped to a thirteen-day low.
The focus moving forward will be the latest preliminary Purchasing Managers Index (PMI) reports, with releases due for both AU and the UK.
Could a second consecutive month of expansion for the UK’s manufacturing industry see GBP rebound against its peers?
Original article continues below:
Pound Australian dollar exchange rate falters as risk appetite increases
The pound Australian dollar (GBP/AUD) exchange rate is losing ground this morning as upbeat trading conditions permeate global markets.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9221, down approximately 0.2% from this morning’s opening rate.
Australian dollar (AUD) edges higher amid improving market mood
The acutely risk-sensitive Australian dollar (AUD) is climbing higher this morning amid an increasing appetite for risk.
As escalating tensions in the Middle East continue to rock global markets, AUD’s status as a riskier asset is garnering investor interest.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, observed:
‘The FTSE 100 has spring in its step at the start of the week, amid an easing of geopolitical tensions.
The pulse of positivity comes in the absence of fresh retaliatory attacks by Israel or Iran and the US flexing its funding muscle and passing a crucial aid package for Ukraine.’
Elsewhere, the commodity-linked ‘Aussie’ is further supported this morning by a slight uptick in iron ore and coal prices.
Pound (GBP) subdued amid lack of data
The pound (GBP) is trading without a clear trajectory this morning amid a data-light start to the session.
In the absence of any notable releases so far, shifting interest rate cut speculations appear to be limiting Sterling’s movements, as recent commentary from Bank of England (BoE) Dave Ramsden weighs on GBP exchange rates.
Speaking at the Peterson Institute of International Economics on Friday, the Deputy Governor said:
‘Given we know the level of the Ofgem price cap for April and also taking account of the freezing of fuel duties in the March Budget, then other things equal we can be confident headline CPI inflation will fall sharply in April, to close to the 2% target.’
Echoing BoE Governor Andrew Bailey’s dovish assertions, further signals from senior BoE policymakers serve to deter investor interest in the pound amid surmounting interest rate cut bets.
Pound Australian dollar exchange rate forecast: PMIs in focus
Looking ahead, Australia’s preliminary PMIs are due for release. Economists forecast a marginal slowdown in service sector activity to 54 in April, while the manufacturing sector is due to contract at a slower pace, due to print at 47.9.
Should the services index print firmly in expansion territory for a third consecutive month, the ‘Aussie’ may garner investor interest. However, AUD’s upside potential could be marred by another month of lacklustre output in manufacturing.
The UK’s latest preliminary PMIs are also due for release tomorrow. Following an upward revision to March’s manufacturing PMI, the index printed above 50, pointing to the first expansion in the UK’s manufacturing sector since July 2022. Should the index report another strong figure in April, GBP could strengthen.
Tomorrow afternoon, a speech from BoE Chief Economist Huw Pill could drive additional GBP volatility. Any dovish signals may serve to undermine GBP’s potential gains as the session progresses.