The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate declined by around -0.20% on Thursday morning.
As traders await British Retail Sales data, due for publication later on Thursday morning, the Pound is generally trending lower versus most of its major peers. The depreciation can be attributed to a combination of levelling off from Wednesday’s gains and a lack of demand amid political uncertainty as we draw ever closer to the general election.
The Australian Dollar, meanwhile, edged higher versus many of its most traded currency competitors despite manufacturing data out of China, which showed output remained below the 50 mark that separates growth from contraction. The fractional uptrend can be linked to speculation that the Reserve Bank of Australia (RBA) won’t cut rates in the next policy meeting after Wednesday’s inflation data met with expectations.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9378.
Yesterday…
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate declined by around -0.42% on Wednesday morning.
Minutes from the Bank of England’s (BoE) most recent policy meeting were generally upbeat as policy makers saw better-than-expected growth in the Eurozone as positive for the UK. The advance has been somewhat laboured, however, with the forthcoming general election weighing on demand for the Pound amid political uncertainty.
The Australian Dollar, meanwhile, strengthened after core inflation equalled forecast figures. This eased pressure on the Reserve Bank of Australia (RBA) to cut the benchmark interest rate further. A softer US Dollar also aided the ‘Aussie’ (AUD) uptrend amid heightened demand for high-yielding assets.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9273.
Pound Sterling (GBP) Exchange Rate Edges Higher despite Political Uncertainties
The fast-approaching general election is certainly weighing on demand for the Pound, with the British asset having steadily declined versus its major peers over the past month or so. The prospect of a coalition or hung parliament is a scary one for traders who fear a massive policy overhaul. Whichever party, or combination of parties, wins there are likely to be significant changes made. Goldman Sachs analysts have stipulated that a Conservative win would be most desirable for markets, a feeling parroted by many business leaders.
‘A shift to a Labour-led or left-leaning coalition would likely cause weakness, particularly in areas of the market most exposed to policies that reduce labour market flexibility or are most at risk from higher regulation and/or taxation,’ the analysts wrote.
Minutes from the Bank of England’s (BoE) most recent policy meeting were generally upbeat, although all 9 policymakers were unanimous in their decision to hold rates. This is unsurprising with the general election throwing up so many political unknowns. The minutes revealed that the better-than-expected Eurozone growth could see a sooner-than-expected lending rate increase.
‘Although it was too early to be confident, a succession of firmer data suggested that growth in the Euro area economy was picking up,’ the BoE said.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 1.9197 today.
Australian Dollar (AUD) Exchange Rate Strengthens as Inflation Meets Estimates
Australian economic data printed positively on Wednesday, causing the ‘Aussie’ to advance versus many of its major peers. Both the Consumer Price Index and the Core CPI for the 1st quarter printed in line with the median market forecast figures. This eased pressure on the RBA to ease policy further, although the high value of the South Pacific asset is likely to continue to weigh on economic growth. Many economists still expect the RBA to cut rates in May.
‘Australia’s CPI figures aren’t as weak as we expected, but they are unlikely to prompt the RBA to abandon its plans to cut interest rates in early May,’ said Paul Dales, chief Australia and New Zealand economist at Capital Economics. ‘It seems that the boost to inflation from the lower exchange rate is offsetting the drag from weak wage growth and the indirect effects from lower petrol and utility prices.’
The softer US Dollar also contributed to the ‘Aussie’ uptrend, with heightened demand for high-yielding assets thanks to slightly improved market sentiment.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Losses
Given the lack of domestic data to curb the trend, and with the forthcoming general election weighing on demand for the British asset, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold losses for the remainder of Wednesday’s European session.
Thursday will be significant for the GBP/AUD pairing with British retail sales data due for publication.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed to a high of 1.9362 today.
