The Pound to Australian Dollar (GBP/AUD) exchange rate climbed to its strongest level in almost 14 weeks on Thursday as easing UK political uncertainty and weak Australian trade data combined to lift Sterling.
At the time of writing, GBP/AUD was trading at AU$1.9335, up around 0.4% on the day.
Pound to Australian Dollar (GBP/AUD): 1.926169 (-0.14%)
Pound to Dollar (GBP/USD): 1.336909 (+0.23%)
Australian Dollar to Dollar (AUD/USD): 0.694077 (+0.37%)
DAILY RECAP:
The Pound (GBP) strengthened on Thursday as easing UK political uncertainty made Sterling more appealing to investors.
Following Prime Minister Keir Starmer’s resignation last week, markets increasingly expect Andy Burnham to replace him without a drawn-out leadership contest. Burnham has also moved to reassure investors by pledging to stick to the government’s existing fiscal rules, with his flagship speech on Monday receiving a broadly positive market reaction.
As traders continued to price out the political risk premium attached to the Pound, GBP also benefited from some encouraging economic signals. UK mortgage rates have fallen over the past two days, while diesel prices recorded their sharpest monthly decline on record in June.
These developments could help ease both household cost-of-living pressures and business expenses in the months ahead.
Meanwhile, the Australian Dollar (AUD) found itself unable to fend off the Pound, as a mixed market mood left the risk-sensitive currency struggling to garner support.
Weaker-than-forecast domestic trade data overnight also stifled AUD’s potential. Australia’s latest balance of trade showed an unexpected 6.9% slump in exports in May, leading to a trade deficit of AU$3bn.
Near-Term GBP/AUD Forecast: Final PMIs in Focus
Looking ahead, the finalised PMI results for both Australia and the UK are due out on Friday. Australia’s results could support AUD if they confirm a slight improvement, while the British surveys could dent GBP if they confirm a deepening contraction in service sector activity.
The Pound could also take its cues from a speech by Bank of England Governor Andrew Bailey. The BoE chief has maintained a cautious stance in recent weeks, arguing that the bank should take a wait-and-see approach as the impacts of the US-Iran war feed through into the UK economy. GBP investors will be alert to any signals on policy, although Bailey is likely to remain cautious.
Elsewhere, market risk appetite could influence the risk-sensitive Australian Dollar. Any shifts in sentiment could drive AUD volatility.
