Pound Australian Dollar Exchange Rate Sinks as Risk Sentiment Improves as US Fed Commits to Support

GBP/AUD Exchange Rate Falls as Risk-On Mood Returns

The Pound Australian Dollar exchange rate dipped today after the risk-sensitive ‘Aussie’ received following the US Federal Reserve’s pointing to further economic support for the US. The pairing is currently fluctuating around $1.80.

The Australian Dollar (AUD) has benefited from an improvement in risk sentiment following the Federal Reserve’s willingness to maintain support for the world’s largest economy.

Lael Brainard, a Fed Governor, said that he now expects ‘considerably better outcomes’ on America’s ‘growth, an employment and inflation’.

Consequently, this propped up the Australian Dollar Pound exchange rate today, with global market sentiment improving on a more bullish outlook for the US economy.

Naeem Aslam, an analyst at Avatrade, commented:

‘Traders have finally understood that there will be no early exit from loose monetary policy. The US economy needs to recover fully, and it will be some time before that happens.’

However, concerns over the AstraZeneca vaccine have sparked concern over global vaccine rollouts after the UK recommended not giving the vaccine to those under 30 because of blood clot risks.

In Australian economic news, this evening will see the release of the latest AiG Performance of Services Index for March.

Any improvement in the outlook for Australia’s services sector would be AUD-positive.

Pound (GBP) Falls Despite Strong UK Construction PMI

The Pound (GBP) failed to rise against the Australian Dollar (AUD) today despite the publication of the latest UK Construction PMI for March.

The figure beat forecasts, rising from 53.3 to 61.7, buying confidence in the UK’s constructions sector.

Tim Moore, the economics director at IHS Markit, commented on the data:

‘March data revealed a surge in UK construction output as the recovery broadened out from house building to commercial work and civil engineering. Total activity expanded to the greatest extent for six-and-a-half years as residential spending remained robust, commercial projects restarted and infrastructure contract awards moved ahead.’

However, Sterling has suffered following a course correction on the UK’s AstraZeneca jab, which has now only been deemed suitable for the under-30s, according to UK medical regulators.

As a result, GBP investors are concerned that this has caused a lack of confidence in the UK’s Covid-19 vaccination rollout, sparking worries about rising cases of the virus going forward.

Added to this, Europe’s growing Covid-19 crisis is also being perceived as a potential threat to the UK in the weeks or months head.

GBP/AUD Exchange Rate Forecast: Could an Improving Outlook for the US Economy Drive Up Demand for the ‘Aussie’?

Pound (GBP) investors will be eyeing tomorrow’s quarterly bulletin from the Bank of England (BoE).

Any further bullishness about the UK economy would be GBP-positive.

However, the UK’s Covid-19 situation will remain in focus this week, with any further signs of falling Covid-19 infections and deaths buoying confidence in the easing of some restrictions on April 12^th.

We could see the Australian Dollar Pound exchange rate continue to head higher, however, if the outlook for the US economy – the world’s largest – continues to improve.

As a result, demand for risky assets could continue to rise, should the outlook of the global economic situation improve.