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Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Dive after Dovish FOMC Sparks High-Yield Demand

Australian Dollar Currency Forecast

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate declined by around -0.85% on Thursday morning.

After British economic data printed positively, the Pound held gains initiated from positive labour market data results on Wednesday. Retail Sales bettered estimates, stoking speculation that lower inflation is supporting consumer spending.

The Australian Dollar, meanwhile, rallied versus its peers after the Federal Open Market Committee (FOMC) held rates. With futures traders delaying bets as to the timing of a benchmark rate increase, demand for high-yielding assets swelled.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 2.0348.

Pound Sterling (GBP) Exchange Rate Forecast to Soften against the ‘Aussie’ (AUD) despite Better-than-Expected Retail Sales Growth

After Wednesday’s data showed that average earnings accelerated beyond expectations, the Pound strengthened considerably against its major rivals. Higher wage growth, coupled with low levels of inflation, will see consumer confidence rise and spending increase. Many now feel that the easing inflationary headwinds will provoke the Bank of England (BoE) into hiking rates before the close of the year.

Thursday’s domestic data produced positive results. On the year, Retail Sales advanced by 4.6% in May; eclipsing the median market forecast 4.3% growth in sales. Retail Sales including Auto Fuel saw 4.6% growth in May on the year, meeting the market consensus. ‘Retailers have plenty of reasons to be optimistic after the 26th consecutive month of year on year growth. Despite a colder and wetter May than normal, consumers were out in force getting ready for the sunshine. Retailers will be hoping that with continuing low inflation helping to increase consumers’ spending power, they can maintain this confidence through the summer months,’ stated Barclays’ head of retail Richard Lowe.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has fallen to a low of 2.0314 today.

Australian Dollar (AUD) Exchange Rate Forecast to Hold Gains against the British Asset despite Decline in China’s Foreign Investment

Although data out of China showed that May’s Foreign Direct Investment dropped below the market consensus, and Australian economic data was relatively disappointing, the ‘Aussie’ advanced versus most of its major competitors. The appreciation can be connected to futures traders paring bets as to the timing of a Federal Reserve benchmark interest rate increase. The FOMC held the cash rate and Fed Chair Janet Yellen intimated that a September liftoff is very unlikely.

‘We had viewed a clear signal for a September hike at the June meeting as close to a necessary condition for the FOMC to actually hike in September, but the committee did not lay that groundwork,’ chief US economist Jan Hatzius wrote in a note.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Losses ahead of European Commission Decision on Greece

Given that the Australian Dollar is riding high thanks to improved market sentiment following suspected delays to a Fed rate hike, there is a distinct possibility the ‘Aussie’ will soften if Greece fails to secure bailout funds. Therefore, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold losses ahead of the European Commission decision. Should Greece fail to secure aid, market sentiment is likely to dampen considerably.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate advanced to a high of 2.0549 today.