Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Softens Amid Risk Appetite Recovery
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate failed to rally at the start of the week as investors continued to favour the antipodean currency.
With market risk appetite generally declining the mood towards the Australian Dollar (AUD) turned increasingly bullish, particularly in the wake of Friday’s disappointing US jobs report.
This kept AUD exchange rates on a stronger footing, even in the absence of any supportive domestic data.
While the threat of a further escalation in the US-China trade war persists investors have largely shrugged tensions off, allowing the higher-yielding ‘Aussie’ to push higher against its rivals.
GBP/AUD Exchange Rate Struggles to Capitalise on Brexit Turmoil
Brexit-based developments provoked additional volatility for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate, meanwhile.
The unexpected resignation of Brexit secretary David Davies prompted Pound Sterling (GBP) to slump sharply on Monday morning, with investors wrong-footed by the sudden shake-up.
However, GBP exchange rates soon recovered from the blow, in large part thanks to the progress seen at last week’s crunch cabinet meeting.
Analysts at TD Securities commented:
‘As it stands the accord on the “soft Brexit” strategy agreed at the end of last week was seen as a positive development, albeit with plenty of compromises and uncertainty over how the EU responds.
‘We think the path ahead is complicated, with May set to present her plans to the 1922 committee of senior Tories today and the “White Paper” on Thursday. Against this background markets will wait and see whether other key resignations follow.’
If there are signs of a continued push back against Theresa May’s plan the mood towards the Pound could sour significantly.
Comments from Bank of England (BoE) Governor Mark Carney could also stir some GBP exchange rate jitters in the days ahead.
Weaker Australian Lending Could Drive Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Higher
The latest NAB business and Westpac consumer confidence surveys may put further pressure on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate.
Signs that sentiment within the Australian economy is improving would give the Australian Dollar a fresh boost against its rivals.
Focus will also fall on May’s home loans and investment lending data, with lending forecast to contract further on the month.
This could weigh heavily on demand for the Australian Dollar, especially if market risk appetite falters once again.
Any signs that the Trump administration is planning to impose further tariffs on its allies would give investors reason to sell out of the risk-sensitive AUD.
On the other hand, if US data continues to fall short of expectations the Australian Dollar could strengthen as the odds of a more aggressive pace of Federal Reserve monetary tightening diminish.
A fresh uptick in the US consumer price index may drive the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate higher, however.