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Australian Dollar Pound Exchange Rate Fluctuates Following Fed Interest Rate Hike

Pound Sterling Exchange Rates

The Australian Dollar Pound exchange rate saw muted fluctuations in the aftermath of the Fed’s US interest rate hike, as AUD and GBP were both bolstered by domestic factors. AUD GBP began the week at around 0.59 and has generally trended in this region since then.

Australian Dollar (AUD) Supported by Employment Stats despite Low Risk Sentiment

Thursday’s Asian session saw most risk-correlated currencies like the Australian Dollar (AUD) being highly undermined by the Federal Reserve’s latest policy meeting.

While traders expected the Fed’s decision to hike US interest rates 25 basis points, from 0.50% to 0.75%, it was the Fed’s 2017 outlook that saw the most bullishness from foreign exchange markets.

Demand for the US Dollar surged as the Fed indicated that it aimed to hike rates three times throughout 2017, a more hawkish stance than expected.

However, despite the day’s risk-off movement, the Australian Dollar held its ground better than risky peers due to Australia’s optimistic November job market results.

A surprisingly strong 39.1k new jobs were created in Australia throughout November, beating 17.5k projections. October’s employment change figure was also revised higher, to 15.2k.

While Australia’s unemployment rate unexpectedly worsened from 5.6% to 5.7%, this was largely due to the nation’s participation rate increasing further than expected from 64.4% to 64.6%.

Pound (GBP) Demand Mixed as Bank of England (BoE) Overlooks Inflation Increase

The UK has also seen solid ecostats published over the last week, the most recent being Thursday’s publication of November’s retail sales results.

Retail sales impressed by avoiding an expected stagnant 0.0% score month-on-month, instead coming in at 0.5%. The year-on-year also slowed less than expected, from 7.5% to 6.6% instead of the expected 6.0%.

However demand for the currency faltered slightly later in the day as the Bank of England’s (BoE) final 2016 policy meeting indicated that the UK’s recent inflation spikes had not impressed bank officials at all.

BoE Governor Mark Carney instead indicated that things were proceeding generally as expected into 2017 and left monetary policy frozen, neglecting to hint at any form of tightening in the year ahead.

Australian Dollar Pound Exchange Rate Forecast: Low Risk Sentiment Limits AUD Outlook

The Australian Dollar felt a much more direct effect from this week’s Federal Reserve news than the Pound did. With 2017’s US interest rate outlook currently hawkish, risk-correlated currencies like the ‘Aussie’ have a new long-term downside factor.

While the Fed’s outlook could change in January depending on the early days of the Trump administration, risky currencies will see increasingly limited movement if this outlook remains hawkish.

This week’s remaining data from Britain is low-influence and is unlikely to considerably inspire AUD GBP exchange rate movement. Instead, Brexit news or shifts in prices of commodities like iron ore could change the course of the pair before the weekend.

As it stands however, AUD GBP is likely to end the week relatively close to its opening levels and its trajectory may not change considerably until the Reserve Bank of Australia’s (RBA) latest meeting minutes are published next Tuesday.

At the time of writing, the Australian Dollar Pound exchange rate trended in the region of 0.59, while the Pound Australian Dollar exchange rate traded at around 1.69.