The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate strengthened by around 0.56% on Thursday morning.
As Libya urges the United Nations to lift their arms embargo in order to fight Islamic State extremists, market risk appetite dampened significantly. The Australian Dollar softened as a result, with a gold price surge unable to micrify fears that Libya are on the fringe of war.
The Pound, meanwhile, is generally holding a position of strength versus the majority of its most traded currency rivals. This can be attributed to speculation that the Bank of England (BoE) will head the race for rate hikes, a feeling exacerbated by dovish minutes from the Federal Reserve’s most recent policy meeting.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9873.
Yesterday…
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate strengthened by around 0.88% on Wednesday afternoon.
Demand for the Pound heightened dramatically on Wednesday following positive results from domestic data. With speculation mounting that the Bank of England (BoE) will hike the benchmark rate ahead of expectations, the Sterling appreciation is likely to be significant.
Conversely, dampened market sentiment caused the Australian Dollar to stumble versus many of its major rivals. Low oil prices coupled with geopolitical tensions in Libya and Greece has quelled trader risk appetite.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9828.
Pound Sterling (GBP) Exchange Rate Rallies on Positive Data
After a succession of positive results from domestic data, futures traders speculate that the BoE will act as shepherd in a rate hike cycle. Wednesday’s data fuelled the fire of positive sentiment with hawks stoked by the possibility of rate revisions.
Given it has the most weight, in terms of potential to provoke volatility, the positive result from Jobless Claims Change initiated the steep appreciation. Having been forecast at 25,000 fewer claimants, January’s actual result saw a drop of 38,600 benefits claims. This positive data was bolstered by coinciding declination in unemployment, which dropped from 5.8% to 5.7%.
Additionally, Average Weekly Earnings improved by 2.1%, bettering the median market forecast of 1.7% growth. Howard Archer, at IHS, said: ‘A double dose of good news for the economy with earnings growth picking up in December helped by higher bonus payments and the labour market seeing healthy improvement. Earnings growth is now markedly above inflation, which is very good news for households and for consumer spending prospects in 2015.’
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 1.9602.
Australian Dollar (AUD) Exchange Rate Slides on Market Sentiment
As described above, low oil prices and geopolitical upheaval has had a marked detrimental effect on trader risk appetite. As a risk-correlated, high-yielding currency the ‘Aussie’ (AUD) is highly sensitive to trader sentiment. The depreciation will be welcomed by the Reserve Bank of Australia (RBA) who has complained openly about overvaluation acting like a sleeping policeman on the road to economic recovery.
The Australian Dollar ‘remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices,’ stated RBA Governor Glenn Stevens. ‘A lower exchange rate is likely to be needed to achieve balanced growth in the economy.’
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Gains
Given that damp market sentiment is unlikely to warm amid a climate of unknowns in Russia, Libya and Greece; the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold gains for the remainder of Wednesday.
Thursday’s data pertaining to both the UK and Australia is of little significance in terms of its potential to drive changes, so it is highly possible that Thursday’s trade will emulate that of Wednesday’s.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed to a high of 1.9815 today.
