GBP/AUD Exchange Rate Edges Higher as US Elections Weigh on Risky Assets
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.2% today, with the pairing currently trading around AU$1.827.
The Australian Dollar (AUD) fell today owing to dampened risk sentiment as the US election hangs in the balance. Democrat candidate Joe Biden leads by 238 to incumbent Donald Trump’s 213, at the time of writing.
Adrian Lowcock, the head of personal investing at Willis Owen, explains:
‘It’s the worst outcome for markets, with futures jumping around as traders switch their trades to try and reflect the shifting sentiment towards the candidates, and we expect volatility to be high today. Investors may have to endure some vicious swings for the next few days if this drags on, and it has echoes of 2000 about it, when the result of George Bush Jnr versus Al Gore was too close to call.’
As a result, appetite for the risk-averse ‘Aussie’ remains under pressure as a protracted US election will drag down risk-sentiment.
Furthermore, with such a close result, expectations of complications of a US stimulus package are also weakening confidence in global markets.
In Australian economic news, today saw the release of September’s Retail Sales, which fell below forecasts to -1.1%.
With Australia’s economic outlook remaining uncertain as global Covid-19 cases increase, ‘Aussie’ investors are buckling in for further global economic turmoil as the US election results unfold.
Pound (GBP) Volatile as UK Markets Brace for Parliamentary Lockdown Vote
The Pound (GBP) rose against the Australian Dollar (AUD) today as UK markets brace for the Parliamentary vote on the second national lockdown.
However, with the Conservative Party and Labour Party expected to vote largely in favour of the new measures, GBP investors are cautious as the outlook for the British economy darkens.
Nonetheless, Prime Minister Boris Johnson has continued to insist that the lockdown will end on December 2nd, which has provided a glimmer of hope for the fourth quarter.
In UK economic news, today saw the release of October’s UK Services PMI, which fell below consensus from 52.3 to 51.4.
Duncan Brock, the Group Director at the Chartered Institute of Procurement & Supply, commented on the data:
‘Ongoing lockdown measures and Covid disruption knocked the wind out of the sector’s sails last month, with the deepest fall in new orders since June. The return to uncertainty and curbs on free movement have started to wipe out the gains of the summer, and consumer-facing businesses were the hardest hit.’
GBP/AUD Forecast: Sterling to Sink as UK Enters Lockdown
Pound (GBP ) traders will be awaiting tomorrow’s Bank of England (BoE) interest rate decision.
Although the Bank is expected to hold rates at 0.1%, any dovishness about the UK economy would prove GBP-negative.
Tomorrow will see the release of the latest UK Construction PMI for October. If this sinks significantly, then the Pound would suffer.
The Australian Dollar (AUD) will remain sensitive to global risk sentiment. As a result, we could see the risk-averse ‘Aussie’ suffer if US political uncertainties escalate throughout the next few days.
The UK set to enter lockdown as of midnight tonight. Consequently, the GBP/AUD exchange rate will fall as the outlook for the economy darkens.