Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Holds Half-Cent Gains
Near the beginning of the week, the British Pound to Australian Dollar (GBP/AUD) exchange rate saw a surge in demand in reaction to UK growth data, and thus far the pair has been able to sustain most of those gains. This is despite stronger market demand for the Australian Dollar on the back of hopes for economic stimulus in China, though the Australian Dollar’s appeal has been limited by mixed Australian data.
After opening this week at the level of 1.7934, GBP/AUD briefly dipped to a weekly low of 1.7851 before rebounding.
Since then, GBP/AUD has been trending near the key level of 1.8000, where it continues to trend at the time of writing.
Investors were hesitant to keep buying GBP/AUD today as the latest Chinese news bolstered risk and trade-sentiment.
Pound (GBP) Losses Limited Thanks to Rising Brexit Hopes
The Pound has had a pretty bullish week so far, starting the week out on a strong note as investors digested a surprisingly resilient UK Gross Domestic Product (GDP) growth rate report.
UK growth was expected to contract in the three months up to July. While the data printed a stagnant 0.0%, this was enough to offset concerns that Britain’s economy was headed for an imminent recession.
Sterling surged as a result, and its gains have been supported by Brexit hopes and speculation on top of that.
On Monday, UK Parliament successfully passed a bill to prevent a no-deal Brexit into law.
Since then Parliament has been prorogued, but MPs are reportedly still exploring ways to make sure a no-deal Brexit doesn’t happen by discussing the possibility of a cross-party backing for ex-Prime Minister Theresa May’s ill-fated Brexit deal.
Amid hopes that a no-deal Brexit can be prevented, as well as parliament being closed and this week’s UK data being better than expected, the Pound’s recent chaotic movement has calmed and the currency is sustaining gains.
According to analysts from ING:
‘With the UK Parliament suspended for the next 5 weeks, GBP may enjoy some more calm today / this week, but we expect pressure on Sterling to return once the early elections are announced.’
Australian Dollar (AUD) Sturdy on China Stimulus Hopes
The Australian Dollar has seen mixed demand this week, which has prevented it from avoiding losses against a stronger Pound.
While the ‘Aussie’ has been weakened by this week’s disappointing data, the currency’s appeal has been bolstered by higher market demand for currencies correlated to risk and trade.
As China is Australia’s biggest trade partner and the Australian Dollar is often seen as a liquid proxy for Chinese economic sentiment, the Australian Dollar has benefitted from rising US-China trade optimism as well as hopes that China is preparing fresh economic stimulus.
China’s state-run press has indicated that the country would introduce measures to ease the negative impact of the US-China trade war in China’s economy.
As a result of this, GBP/AUD struggled to advance further today.
Still, the Australian Dollar was unable to push GBP/AUD lower again either due to concerns over Australia’s economic outlook.
Following disappointing Australian business confidence data yesterday, Australia’s September consumer confidence index worsened today as well.
These stats have worsened concerns that the Reserve Bank of Australia (RBA) will be pressured into cutting Australian interest rates again soon after all.
GBP/AUD Exchange Rate Forecast: Politics and Trade War in Focus
As most of this week’s notable UK and Australian ecostats have already been published, Pound to Australian Dollar exchange rate investors are likely to turn their attention towards developments in politics and market sentiment in the coming days.
UK Parliament has been prorogued, but MPs are still exploring ways to prevent a no-deal Brexit in the meantime.
Any notable developments in UK politics or Brexit are likely to dominate the Pound’s movement. Meanwhile, Australian Dollar investors will focus on US-China trade developments and other shifts in market sentiment.
If US-China trade relations are perceived as improving, AUD is likely to keep strengthening and the Pound to Australian Dollar exchange rate could shed some of its recent gains.