GBP/AUD exchange rate movement limited amid data dearth
The pound Australian dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as a lack of significant data from both the UK and Australia leaves the currencies exposed to external factors. The US dollar (USD) is gaining strength as risk appetite eases, weighing upon risk-on currencies such as the Australian dollar (AUD).
At the time of writing, GBP/AUD is trading at A$1.9329: virtually unchanged from opening levels.
Australian dollar (AUD) dented by growing risk aversion
The Australian dollar is trading in a mixed range this morning, attracting marginal headwinds on account of its risk-on status.
Renewed strength in the US dollar is weighing upon the Antipodean currencies; USD represents a safe-haven asset preferred during times of uncertainty. Ahead of the latest meeting minutes from the Federal Open Market Committee (FOMC), traders have turned bearish.
Nevertheless, the ‘Aussie’ remains supported by the hawkish stance of the Australian central bank. The Reserve Bank of Australia (RBA) is committed to bring inflation down, to the extent that it has indicated further interest rate hikes may be on the cards.
This contrasts with the majority of other major central banks, who are dialling back restrictive policy measures in an attempt to promote economic expansion. Economist Saul Eslake considers that RBA policymakers may be hoping that the mere mention of a possible rate hike will provoke a reaction.
He remarks: ‘it would seem that the RBA thinks it actually has tightened monetary policy [a bit] by overtly staring down market pricing of a series of rate cuts between November this year and the middle of next year, rather than by explicitly raising the cash rate.’
Elsewhere, rumours of economic stimulus measures from China’s government may be lending additional support to AUD. Given the close trading relationship between Australia and China, Chinese tailwinds invariably buoy the ‘Aussie’.
Pound (GBP) trades mixed ahead of Friday’s speech
The pound (GBP) is trending in a mixed range against its peers today as a lack of high impact UK data leaves the currency to trade upon external factors.
Expectations that the Federal Reserve bank will cut interest rates in September has lent a marginal boost to the pound, as the Bank of England (BoE) appears more hawkish by comparison. The UK central bank is expected to loosen monetary policy at a slower pace than its international counterparts.
Nevertheless, the outlook for the BoE is far from certain. GBP traders await Governor Andrew Bailey’s speech at the Jackson Hole Symposium on Friday for further clues as to the bank’s next move.
In the meantime, the release of August’s flash PMIs tomorrow is likely to inspire some movement in pound exchange rates. Manufacturing activity is expected to have continued at the same pace this month as last, while the services reading looks to have increased from July.
If the data impresses, Sterling may enjoy tailwinds; although the UK economy expanded in the second quarter of 2024, high productivity in the second half of the year was not forecast. Institute of Directors chief economist Anna Leach remarked following recent GDP data:
‘The challenge for government is to firmly lift the U.K.’s growth performance out of the doldrums. There’re no quick fixes here.’
GBP/AUD exchange rate forecast: US stimuli to trigger movement?
The pound Australian dollar exchange rate could trade this afternoon upon USD movement, given the ongoing lack of domestic data. If the US dollar weakens ahead of the release of the FOMC’s meeting minutes, both the pound and the ‘Aussie’ could enjoy gains.
Elsewhere, risk sentiment may also drive movement in the exchange rate. If risk appetite improves throughout the day, AUD/GBP is likely to climb as the Australian dollar is the more risk averse of the two currencies.