Australian Dollar to Pound Exchange Rate Recovers as Risk-Sentiment Improves
Risk-sentiment has been all over the place this week, amid geopolitical uncertainties and a brief political panic gripping Italy. It has caused fluctuations in the Australian Dollar to Pound (AUD/GBP) exchange rate for most of the week so far.
Since opening at the level of 0.5682 on Monday, AUD/GBP has trended between highs of 0.5693 and lows of 0.5645. The pair trended lower on Wednesday morning, as Italian political jitters weighed on risk-sentiment.
However, risk-sentiment improved again in the afternoon and the US Dollar (USD) was weakened by US data. This left risky currencies like the Australian Dollar (AUD) more appealing and helped AUD/GBP to recover.
At the time of writing, AUD/GBP trended near the level of 0.5680 – close to the week’s opening levels again.
As the Pound (GBP) has not seen much domestic support in recent sessions, most of this week’s Australian Dollar to Pound (AUD/GBP) exchange rate movement has been driven by the ‘Aussie’.
Australian Dollar (AUD) Recovers as US Dollar (USD) Sold from Highs
The US Dollar’s (USD) rally slowed in the past week, but following a disappointing US growth report on Wednesday some investors opted to sell the US currency from its highs. This made risky currencies like the Australian Dollar (AUD) much more appealing.
Geopolitical news and Eurozone politics have been a major market focus this week.
Hopes that the US and North Korea will still hold a summit in June have boosted risk-sentiment, but also strengthened the US Dollar (USD) limiting the strength of most risky currencies.
Following that, markets became anxious about the possibility of Italy seeing another election within the next year and this briefly made risky currencies unappealing again.
Then on Wednesday, market jitters surrounding Italy lightened and the US Dollar was weakened by a surprising slowdown in US growth.
This made the risky Australian Dollar more appealing at the time of writing. However, as recent Australian data has disappointed, AUD/GBP strength is still limited.
Pound (GBP) Exchange Rates Limp as UK Economic Outlook Remains Gloomy
Bank of England (BoE) interest rate hike bets fell in reaction to last week’s disappointing UK inflation and growth reports, and Brexit uncertainty continues to put even further pressure on Britain’s economic outlook and the appeal of the Pound.
There have been no notable UK ecostats published this week, nor have there been any optimistic Brexit developments.
Essentially, the Pound outlook is just as gloomy as it was last week, if not more so. Investors have had no reason to buy the Pound, besides weakness in rivals.
Economists believe that there could still be further weakness ahead in UK ecostats, which would certainly put the Bank of England off any potential monetary policy tightening in the coming year.
Australian Dollar to Pound (AUD/GBP) Forecast: Manufacturing PMIs Ahead
For the remainder of this week, the Australian Dollar to Pound (AUD/GBP) exchange rate could continue to fluctuate around the week’s opening levels depending on how risk-sentiment shifts.
If geopolitical and Eurozone political jitters calm further, AUD/GBP may be in for further gains – especially if the US Dollar (USD) remains unappealing.
However, if the US Dollar (USD) sees another boost in demand in response to Thursday or Friday data, AUD/GBP may fall again.
It’s worth keeping an eye on upcoming data from Australia and the UK. Australian data in particular could boost AUD/GBP if it impresses, by giving the ‘Aussie’ stronger domestic support.
Thursday will see the publication of Australia’s private capital expenditure and private sector credit reports, as well as Britain’s May consumer confidence survey from Gfk.
Australian and UK manufacturing PMI stats from May will be published on Friday. If these manufacturing stats surprise investors, they could cause some late-week movement in AUD/GBP.