Pound to Australian Dollar (GBP/AUD) Exchange Rate Gains as Investor Sentiment Rises

February 23, 2015 - Written by Tim Boyer

STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Gains as Investor Sentiment Rises

The Pound advanced against the Australian Dollar on Monday as investors’ hopes for a hawkish UK central bank rose. The Pound enjoyed a surge in investor sentiment as investors prepared for Bank of England Governor Mark Carney to testify on the latest inflation report. As recent figures have shown a decline in UK unemployment and gains in wage growth, many experts are expecting a stronger central bank tone when it comes to the discussion of interest rate hikes. Last week saw the Pound reach seven-year highs against some peers such as the Euro after favourable employment data recently emerged. Industry expert Lee Hardman stated: ‘The Pound is continuing to benefit from the strong cyclical momentum of the UK. The labour market report reinforced the Pound’s upward momentum, highlighting a further tightening in the labour market and stronger earnings growth. The heightened uncertainty over external financing for Greece also remains a weight on Euro-Pound in the near-term.’ However, the central bank has stated that there is the possibility of a rate cut in coming months if inflation continues to decline.

Meanwhile, the Australian Dollar softened during Monday’s European session after a short-lived rise in Oceanic trading. The ‘Aussie’ rose as risk sentiment took an upswing after Eurogroup creditors agreed to an extension on Greece’s current bailout programme. Trader Matt Richardson commented: ‘Buoyed by general US Dollar weakness and a spike in risk sentiment, the ‘Aussie’ benefitted on a return in market optimism, as Greece and its creditors reached an eleventh hour deal to extend the current bailout programme for another nine months.’

However, some economists are suggesting that sentiment within the Trans Tasman nation may remain low in the near future as willingness to spend remains weak—despite a fall in fuel prices. Economist Craig James stated: ‘With costs easing up for many households following the fall in petrol prices and recent interest rate cut, we can expect many consumers to slowly start opening their wallets and increase their spending as we progress through 2015. Overall, the economy is in a relative stable position, so business owners should start planning for growth in 2015 and take advantage of the expected increase in household disposable income.’

Australian Weekly Consumer Confidence is expected later in Monday’s session and previously resided at 109.8. Australian domestic data is thin on the ground this week which could leave the ‘Aussie’ susceptible to any worldwide events.

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