Pound Australian Dollar Exchange Rate Struggles to Hold Ground with Risk-Sentiment Up
Higher demand for risk-correlated currencies is making it harder for the Pound Australian Dollar (GBP/AUD) exchange rate to hold its ground today. The Australian Dollar (AUD) saw a boost in demand after last night’s Federal Reserve news.
Since opening this week at the level of 1.7941, GBP/AUD has seen mixed movement as both currencies attempt to strengthen.
After climbing for much of yesterday, GBP/AUD tumbled last night and hit a fortnight low of 1.7816 this morning. Since then GBP/AUD has recovered slightly and trends in the region of 1.7892.
Unless the Pound strengthens more before markets close for the week or upcoming Australian retail stats disappoint, GBP/AUD could be in for its third consecutive week of losses.
Pound (GBP) Exchange Rates Remain Appealing on UK Outlook
The Pound remains generally appealing against most major currency rivals. Investors continue to speculate that Britain will be one of the first major economies to recover from the coronavirus pandemic.
As a result, Sterling continued to benefit from this speculation amid the Bank of England’s (BoE) March policy decision today.
Sterling has been unable to advance much against the Australian Dollar in recent weeks though, due to broad Australian Dollar strength.
Australian Dollar (AUD) Exchange Rates Capitalise on Risk-Sentiment amid Strong Jobs Report
The Australian Dollar has been able to benefit from the market’s mood this week.
As a currency often correlated to market risk and trade-sentiment, the Australian Dollar was more appealing after the Federal Reserve took a more dovish stance during its policy decision last night.
The Fed news doused speculation of tighter US monetary policy. This made investors more willing to take risks, boosting AUD.
Australia’s latest job market report was also better than expected, further boosting the ‘Aussie’ today. The key unemployment rate saw a surprisingly strong improvement from 6.4% to 5.8%.
According to Ben Udy, Economist at Capital Economics:
‘The surge in employment in February is consistent with our view that the Australian labour market is tightening much faster than most expect,
Indeed, we expect employment to continue to rise, albeit at a slower pace than in February, which will lower the unemployment rate even further in the months ahead.’
Pound Australian Dollar (GBP/AUD) Exchange Rate Looks to Australian Retail Report
With most of the week’s UK news having passed, GBP/AUD traders will largely be digesting central bank news and reacting to Australian data before markets close for the week.
Reaction to the Bank of England’s (BoE) policy decision today will likely keep driving the Pound.
However, the Australian Dollar could end the week with even stronger demand if Friday’s Australian retail sales results beat forecasts.
Australia’s February retail sales results are expected to show retail activity slowed to 0.4% throughout the month.
However, following far stronger than expected Australian job market data, a strong retail report could make investors even more optimistic about Australia’s outlook and recovery prospects.
If AUD continues to strengthen on good Australian data, GBP/AUD may be in for further losses.
UK consumer confidence and public borrowing data, also due tomorrow, could be overshadowed by Australian data for Pound Australian Dollar (GBP/AUD) exchange rates.
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