Pound-Australian Dollar could remain under pressure if risk appetite stays firm, although a more hawkish Bailey could help Sterling recover.
The Pound Australian Dollar (GBP/AUD) exchange rate hit a three-month low on Thursday as a risk-on mood swept markets.
At the time of writing, GBP/AUD was trading at AU$1.8797, having bounced off a low point of AU$1.8797.
DAILY RECAP:
The Australian Dollar (AUD) softened slightly during Thursday’s Asian trading session following downbeat domestic trade data.
Australia’s latest balance of trade showed a narrowing surplus in July. Both exports and imports contracted, with the former declining at a sharper pace.
However, the risk-sensitive ‘Aussie’ was cushioned by an upbeat market mood, limiting losses.
When the European session started, AUD was able to attract fresh support and firm against some of its weaker peers.
Meanwhile, the Pound (GBP) was subdued on Thursday as markets digested the UK’s final services PMI.
Although growth in the UK’s vital services sector hit a four-month high in August, the final reading was revised slightly lower than the preliminary estimate. The PMI rose from 52.1 to 52.5, rather than 52.8. This weaker-than-expected result stifled Sterling’s upside potential.
Meanwhile, GBP investors seemed somewhat perturbed by the recent surge in UK government borrowing costs, after bond yields struck a 19-year high on Wednesday. This also limited the Pound’s appeal.
Near-Term GBP/AUD Forecast: Central Bank Expectations to Drive Movement?
Looking forward, on Friday GBP investors will likely focus on a speech from Bank of England (BoE) Governor Andrew Bailey. If Bailey maintains his cautious tone about the need for interest rate hikes, Sterling could stumble.
However, if the BoE chief starts to sound more concerned about the upside risks to inflation then the Pound could catch bids.
Meanwhile, Australian economic data is thin on the ground, potentially leaving the ‘Aussie’ to trade on global risk dynamics.
US economic data could play a big part in the market mood. If a weak non-farm payrolls report dampens Federal Reserve interest rate hike bets, an upbeat mood could lift AUD.
Our currency coverage draws on live market data, official economic releases and published bank research.
