The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate experienced a largely unexpected rally yesterday as the global economic situation had investors briefly rushing for safer currencies.
‘Brexit’ Concerns Deter Markets from Investing in Traditionally Safer Sterling (GBP)
UK news this week has been dominated by continued EU referendum discussions, something that analysts and investors will definitely be getting used to in the months leading up to June’s historic vote. Unease has left the Pound (GBP) weak but the relatively safe Sterling still experienced gains during yesterday’s global uncertainty.
The currently easily-influenced pair is moving at around -0.8% and is trending in the region of 1.9000, down on this morning’s levels of 1.9151.
Yesterday’s European Central Bank (ECB) announcements and discussion had greatly influenced the global financial markets. The Pound experienced brief strength against many of its rivals as Eurozone sentiment skyrocketed.
However, Australia’s currently optimistic market sentiment seems to have persevered, and the traditionally risky Australian Dollar (AUD) has been gradually regaining strength against Sterling since last night.
This is thought to be a result of Australia’s generally bullish market week. Positive GDP releases for the nation last week as well as this week’s iron ore rally and commodity bloc optimism seem to have weathered through enough for the ‘Aussie’ to maintain strength against the Pound.
European Central Bank (ECB) Announcement Influences Market Sentiment
European Central Bank (ECB) President Mario Draghi announced aggressive action to stimulate the Eurozone’s economy yesterday, cutting rates and raising the level of Quantitative Easing (QE) far more than investors and analysts expected.
However, the Euro’s (EUR) sharp downtrend was abruptly reversed after Draghi admitted that the ECB was unlikely to make further rate cuts – implying that the central bank is out of moves.
Investors were initially wary of their position on the Pound due to the UK’s close relationship with the Eurozone and higher-risk currencies like the ‘Aussie’ benefited from a bout of bullish market sentiment. However they reacted equally dramatically to the revelation that further cuts were unlikely by buying into the Euro. The uncertainty surrounding the ECB action bolstered demand for safer currencies and the ‘Aussie’ accordingly trimmed gains.
The Australian Dollar (AUD) was initially unable to withstand this rise of investor confidence in the European currencies as the GBP/AUD exchange rate hit a week high yesterday. Sterling’s strength seemed temporary however as rates began dropping steadily in the evening – undeterred by a narrower than forecast trade deficit for the UK.
Australia’s domestic currency continues to see strength today as confidence once more fades from the ‘Brexit’ burdened Pound. China’s renewed confidence in their economic situation, despite poor data, is thought to be keeping confidence in the commodity bloc strong. Investors continue to have faith in the risky ‘Aussie’ due to iron ore prices remaining high despite drops in the last three days.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Budget and Rate Decisions Set to Make Waves
While the Pound has been at the mercy of the economic tides for the last week, relatively unable to maintain its own strength, considerable UK data due for release next week may finally sway Sterling sentiment in a definitive direction.
Chancellor of the Exchequer George Osborne is set to deliver the key budget speech in parliament next Wednesday, followed by the Bank of England’s (BoE) new rate decision on Thursday. Such vital news could finally distract Britain from its regular ‘Brexit’ concerns, giving GBP a more focused direction towards the end of next week.
The Australian Dollar, on the other hand, is still expected to perform strongly going forward. Iron Ore prices are predicted by analysts to calm down by the end of June, leaving a good few months of potential demand for Australia’s primary commodity.
In the midst of other commodity bloc countries; Canada’s oil obstacles and New Zealand’s milk crisis, the Australian Dollar seems to have risen as one of the more-reliable high-risk currencies to buy this week, and a positive immediate future makes it seem unlikely that investors will flock away from it any time soon.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9000 while the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate trends in the region of 0.5264.
Comments are closed.