GBP/AUD exchange rate trapped in narrow range
The pound Australian dollar (GBP/AUD) exchange rate is trending sideways this morning as a lack of domestic data from both the UK and Australia leaves the currencies to trend on external factors.
At the time of writing, GBP/AUD is trading at A$1.9020, marginally higher than this time yesterday.
Pound (GBP) sentiment tepid amid lack of data
In the past week, the pound (GBP) has encountered multiple headwinds as investors speculate over the Bank of England’s (BoE) interest rate stance. Mixed comments from multiple BoE officials in recent weeks have complicated rate cut bets; without significant macroeconomic data to turn to, sterling sentiment rides upon central bank expectations.
The latest construction PMI from S&P Global failed to inspire pound tailwinds yesterday: British construction companies enjoyed their fastest expansion in more than a year according to April’s reading. The data printed at 53.0 from 50.2 in March – a significant jump – yet sterling traders remained downcast despite optimistic comments:
Tim Moore, economics director at S&P Global remarked that: ‘Demand was boosted by greater confidence regarding the broader UK economic outlook.’
Also weighing upon morale may have been a disappointing release from the British Retail Consortium (BRC). The organisation’s retail sales monitor for April printed at –4.4% – a far cry from the 1.6% forecast. Helen Dickinson, chief executive of the BRC, attributed the fall in sales to wet weather and the early timing of Easter.
‘Many retailers are hoping for brighter sales over the summer months as social events ramp up,’ Dickinson observed, ‘and consumer confidence could improve with a potential cut in interest rates.’
Uncertainty continues to depress GBP trading, however, with a recovery in US dollar (USD) exchange rates further pressuring the ‘Greenback’s’ risk-on peers.
Australian dollar (AUD) support fades following RBA decision
The Australian dollar (AUD) is unable to extend last week’s gains against the pound today as investors remain subdued following the decision by the Reserve Bank of Australia (RBA) to keep interest rates on hold.
A risk-on mood at the end of last week supported the ‘Aussie’ against the majority of peers, given the currency’s risk sensitive nature: AUD/GBP climbed to a fresh four-month high on Friday. Subsequently, however, bullish expectations from AUD traders were disappointed as the RBA was non-committal in its forward guidance yesterday.
At a press conference in Sydney, Governor Michele Bullock said: ‘Back in the last meeting, we thought that things were reasonably balanced. I think we still think they’re reasonably balanced with perhaps a little bit of a signal that we need to be very watchful on the upside.’
While the interest rate hold had been widely predicted, forecasters anticipated a hawkish commentary given last month’s higher than expected inflation release. Previously, most economists had estimated that the RBA would cut interest rates from as soon as September.
Employment concerns may go some way to explaining the central bank’s relative caution, as higher interest rates jeopardise businesses’ hiring budgets. Joblessness in Australia climbed in March as employment tumbled – Bjorn Jarvis, ABS head of labour statistics, observed:
‘The small drop in employment in March followed a larger-than-usual flow of people into employment in February… However, in March, the flows into employment had returned to a more usual pattern.’
GBP/AUD exchange rate forecast: US activity to influence currency dynamics?
The pound Australian dollar exchange rate is left to trade according to risk sentiment for the remainder of the session, alongside external factors such as international politics.
Fluctuation in US dollar exchange rates could inspire movement, as support for the ‘Greenback’ implies a risk-off mood; as USD strengthens, the risk-on ‘Aussie’ faces headwinds. Nevertheless, downbeat sterling sentiment caps GBP/AUD gains, while strong Chinese data on Thursday could boost AUD.
The main event tomorrow will be the BoE’s interest rate decision, however. Markets will be on the lookout for a clear consensus on monetary policy from the central bank, given conflicting comments in recent weeks.