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Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Soften as IMF Warning to Fed Fuels Risk-Appetite

Australian Dollar Currency Forecast

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate softened by around -0.36% on Friday morning.

Despite the fact that British citizens upwardly revised inflation expectations over the coming 12 months, the Pound softened versus many of its rivals. The depreciation can be linked to a report from the Recruitment and Employment Confederation (REC) and audit and tax firm KPMG, which stated that the pace of hiring in the UK slowed in May.

The Australian Dollar, meanwhile, appreciated versus many of its currency rivals thanks to improved market sentiment. After the International Monetary Fund (IMF) urged the Federal Reserve to avoid cutting rates until 2016, improved market risk-sentiment saw heightened demand for the high-yielding ‘Aussie’ (AUD). Additional gains can be attributed to positive results from domestic data.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9902.

Pound Sterling (GBP) Exchange Rate Forecast to Soften against the ‘Aussie’ on Slow Pace of Hiring

The Bank of England (BoE) Inflation report for the next 12 months was upwardly revised from 1.9% to 2.2% even after a recent dip into deflation. Many now expect the central bank to increase the cash rate in 2016. However, the Pound softened as trader focus was dominated by a dovish report which showed May’s UK hiring pace slowed. Given the influence labour market conditions have on policy decisions, the report could delay bets as to the timing of a lending rate increase.

‘The UK job market saw a slight slowdown in May, as those on boards took time to digest the election result and work out the ramifications for their business,’ Bernard Brown, a partner at KPMG, said.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has fallen to a low of 1.9880 today.

Australian Dollar (AUD) Exchange Rate Forecast to Advance versus the British Asset as Foreign Reserves Rise

Market sentiment has been comparatively damp over the past few weeks as speculation mounted regarding a sooner-than-expected US interest rate revision. Sentiment returned to risk-appetite on Thursday, however, after the IMF urged the Federal Reserve to hold off increasing the lending rate prior to 2016. Improved market sentiment is positive for the risk-correlated ‘Aussie’.

The Fed’s policy-setting committee ‘should remain data dependent and defer its first increase in policy rates until there are greater signs of wage or price inflation than are currently evident,’ the IMF said in its statement. Based on the fund’s economic forecast, and ‘barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016.’

Additional ‘Aussie’ gains can be linked to positive results from domestic data. The AiG Performance of Construction Index rose from 47 to 47.8 in May, edging closer towards expansion territory. Additionally, Foreign Reserves advanced from A$67.8 billion to A$73.2 billion.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Losses ahead of US Data

As traders await significant US labour market data, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold losses. Should the US data print positively, the Australian Dollar is likely to slump versus its major peers. Negative results from US data will see the Oceanic currency strengthen, and pared fed bets would keep the South Pacific asset in a position of strength.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate reached a high of 2.0003 today.