Pound Australian dollar (GBP/AUD) wobbles amid absence of data
The pound Australian dollar (GBP/AUD) exchange rate is trapped in a narrow range this morning amid a lack of fresh data.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9572, virtually unchanged from this morning’s opening rate.
Pound (GBP) muted amid lull in data
This morning, the pound (GBP) remains muted as the week kicks off with minimal data from the UK.
The absence of significant macroeconomic updates has left room for concerns about the upcoming Autumn Budget to dampen GBP’s movements.
There is increasing apprehension that UK Chancellor Rachel Reeve’s forthcoming budget could introduce severe tax increases and spending reductions throughout Britain, exacerbating fears of a £22 billion shortfall in the UK’s public finances and potentially destabilising the economy further.
In light of these concerns, a consortium of prominent UK economists has taken a public stance, urging Chancellor Reeves to rethink the proposed measures for the impactful 2024 Autumn Budget. They expressed their recommendations in a letter that was highlighted in today’s Financial Times.
An excerpt from the letter reads:
‘We do not see how the planned “decade of national renewal” can take place if these cuts are delivered.
To follow through on these plans would be to repeat the mistakes of the past, where investment cuts made in the name of fiscal prudence have damaged the foundations of the economy and undermined the UK’s long-term fiscal sustainability.’
Given the current economic uncertainties and the lack of supportive data, investors might remain cautious, steering clear of making substantial bets on the pound as a renewed wave of economic pessimism regarding the UK begins to influence global markets once more.
Australian dollar (AUD) supported by hawkish RBA
The Australian dollar is posting modest gains this morning despite a lack of fresh Australian data.
Amid an absence of data and a mixed market sentiment, the ‘Aussie’ finds support in growing speculation that the Reserve Bank of Australia (RBA) could maintain a ‘higher for longer’, according to Oxford Economics Australia (OEA).
In their most recent forecast, the firm stated that the RBA is not likely to deliver any monetary easing until next summer.
Sean Langcake, Head of Macroeconomic Forecasting at the OEA, said:
‘Given the RBA’s hawkish rhetoric, we don’t see rate cuts coming until the second quarter of 2025. The labour market has defied a marked slowdown in activity, which is testing the RBA’s very patient approach to bringing inflation back to its target.
Concurrently, a significant easing in fiscal policy will give the economy a boost, which is welcome for households, but less so for inflation hawks.’
Additionally, as surging Federal Reserve rate cut bets sink the US dollar (USD), the ‘Aussie’ may remain on the front foot throughout Monday’s European trading session.
Pound Australian dollar exchange rate forecast: market sentiment to drive movement?
Looking ahead, a lack of immediate data from both the UK and Australia could see global risk dynamics play a significant role in the pound Australian dollar exchange rate. Any bullish trade could lift the acutely risk-sensitive ‘Aussie’ against its rivals. Alternatively, gloomy trading conditions could see GBP take precedent.