Pound Australian dollar (GBP/AUD) exchange rate remains high amid dismal market mood
Article updated 16:32, 4/6/2024
The pound Australian dollar (GBP/AUD) exchange rate is remaining elevated this afternoon, as a bleak market mood weakens the Australian dollar (AUD).
As the ‘Aussie’ is significantly more risk-sensitive than the pound (GBP), Sterling is able to remain above it.
The downbeat market mood may have been furthered by the latest American JOLTs job openings report. This printed beneath expectations, and indicated growing slack in the US labour market. Because this may further signal weakness in one of the world’s largest economies, the market mood remains downbeat.
At the time of writing, GBP/AUD is trading at around AU$1.9236, a rise of just over 0.4% from the morning’s opening rates.
Original article continues below:
Pound Australian dollar exchange rate rises as Australian profits drop
The pound Australian dollar exchange rate is rallying this morning, following a drop in Australian corporate profits.
At the time of writing, GBP/AUD is trading at around AU$1.9214, an increase of just over 0.3% from today’s morning rates.
Australian dollar (AUD) slides as corporate profits drop
The Australian dollar (AUD) is sinking this morning, following a larger-than-expected drop in company profits.
In the first quarter of 2024, company profits dropped by 2.5% on a quarterly basis, above expectations of a 0.9% fall. This marked a significant decline from Q4 2023’s reading of a 7.1% increase, which was revised down from 7.4%.
The data further suggested that inventories were increasing due to weak domestic demand. This suggests that companies are stockpiling rather than accounting for surging demand, a cautious sign for the economy.
Additionally, the latest Australian current account unexpectedly fell into deficit in Q1 2024. Imports were found to have increased, while export costs had shrunk.
Grace Kim, ABS Head of International Statistics, commented:
‘The prices of goods exports fell, led by metal ores prices, after a rise in the December quarter. The price of exported goods was 10.3 per cent lower compared to this time last year.’
Elsewhere, cautious trading conditions are likely hampering the acutely risk-sensitive ‘Aussie’, as investors eye steadier assets.
Pound (GBP) propped up by retail sales recovery
The pound (GBP) is being underpinned this morning by a slight recovery in retail sales in May, as noted by the British Retail Consortium (BRC).
On a monthly basis, sales rose by 0.4%, reversing a decline of 4.4% in April, but beneath forecasts of 1.2% growth.
Helen Dickinson, Chief Executive at the BRC, commented:
‘Despite a strong bank holiday weekend for retailers, minimal improvement to weather across most of May meant only a modest rebound in retail sales last month. Although non-food sales fell over the course of the month, the long weekend did see increased purchases of DIY and gardening equipment, as well as strong clothing sales.’
Elsewhere, a cautious market mood may be capping the pound this morning. Due to its increasingly risk-sensitive nature, investor preference for safe assets is likely limiting its appeal.
Pound Australian dollar exchange rate forecast: AU GDP in focus
Looking ahead for the Australian dollar, the core catalyst of movement is likely to be the latest GDP growth rate.
In the first quarter of 2024, the Australian economy is forecast to have expanded by 0.2% on a quarterly basis.
If this prints in line with forecasts, AUD may rally amid signs of continued economic resilience. However, the meagre levels of growth could cap any gains.
For the pound, due to a lack of other data, investors may focus on the final services PMI for May. If this confirms slowing sector activity, GBP could weaken against its peers.
Elsewhere, risk appetite is likely to play a role in shaping the pound Australian dollar exchange rate.
As AUD is more risk sensitive, bullish trade could weaken the exchange rate. However, a shift towards risk-aversion may benefit the pound.