Pound Australian Dollar Exchange Rate News: GBP/AUD Muted Despite Risk on Mood

November 15, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Muted Despite Risk on Mood

GBP/AUD Exchange Rate Stalls amid Market Sentiment Shift

The Pound to Australian Dollar (GBP/AUD) exchange rate was muted on Tuesday, despite an uptick in risk appetite.

At time of writing the GBP/AUD exchange rate traded at around AU$1.7583, which was virtually unchanged from Tuesday’s opening levels.

Australian Dollar (AUD) Mixed amid Improved Risk Appetite

The Australian Dollar (AUD) traded in a narrow range on Tuesday despite investors beginning to favour more risk-sensitive currencies.

The uptick in risk appetite appeared linked to the increasing optimism over the war in Ukraine. President Volodymyr Zelenskiy has set out conditions for Russia in what he calls a ‘formula for peace’. With an end to the conflict potentially insight, the market mood was boosted, which further supported the ‘Aussie’.

Also lending support to the Australian Dollar were hawkish comments from the Reserve Bank of Australia (RBA). Following the release of November’s meeting minutes it was noted the central bank would ‘not rule out’ larger interest rate hikes in the future. This boosted the ‘Aussie’, which has recently been undercut by dovish hikes from the bank.

However, it’s possible that the risk-sensitive Australian Dollar saw its gains capped by mixed Chinese data on Tuesday.

China’s retail sales unexpectedly dropped in October, from 25% to 0.5%. This sharper-than-expected decline was caused by rising Covid cases in China, which reduced consumer spending. Industrial production expanded by 5% in October, but it didn’t reach the markets expectations of 5.2%. This was caused by the country losing its Covid recovery momentum amid further lockdowns.

Pound (GBP) Recession Fears Grow amid Poor Jobs Data

The Pound (GBP) was also trapped in a narrow range Tuesday, it’s upside hindered by the release of UK jobs data.

The unemployment rate in the UK rose to 3.6%, despite expectations that the rate would remain unchanged in October. This caused investors to worry about how the job market might be affected by the approaching UK recession.

Speaking about the data on Tuesday Yael Selfin, Chief Economist at KPMG UK warned that unemployment could reach as high as 6% by 2024:

‘It is only a matter of time before the recessionary environment spills into the labour market as employers increasingly consider the weakening demand and rising labour costs.’

Also weighing on the Pound was the continued decline of real wage in the face of spiralling inflation. Wages have risen faster than expected, regular pay increased from 5.5% to 5.7% in October. However, consumers spending is continuing to decrease amid the cost-of-living crisis, which is also compounding recession fears.

GBP/AUD Exchange Rate Forecast: GBP to Climb on Inflation Figures?

Looking ahead, its possible that the Pound Australian Dollar exchange rate could be driven by the UK’s consumer price index on Wednesday.

Headline inflation is expected to climb from 10.1% to 10.7% in October, amid recession concerns and cost-of-living woes. If the data prints as expected then the Pound could face headwinds. Although it’s possible these headwinds could be reduced somewhat if inflation isn’t as hot as expected.

It’s also possible that Sterling could get a boost on Wednesday if the rise in inflation bolsters. Bank of England (BoE) rate hike bets.

Turning to Australia, the currency could be supported by the release of the wage price index. The YoY index for Q3 is expected to rise from 2.6% to 3%. An uptick in wages may boost appetite within the RBA for a more aggressive rate hike in the future.

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TAGS: Pound Australian Dollar Forecasts