Pound Australian Dollar (GBP/AUD) Exchange Rate Narrows amid UK Budget Anticipation

March 15, 2023 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Narrows amid UK Budget Anticipation

Pound Australian Dollar (GBP/AUD) Exchange Rate Narrows amid UK Budget Anticipation

The Pound Australian Dollar (GBP/AUD) exchange rate traded in a narrow range on Wednesday morning, as anticipation for the Spring Budget was countered by a souring market mood.

At the time of writing, GBP/AUD was trading at around AU$1.8179, and displayed little movement from Wednesday’s morning rates.

Pound (GBP) Mixed amid Budget Optimism, Downbeat Trade

The Pound (GBP) traded in a mixed fashion on Wednesday morning, as a combination of souring market mood and optimism around UK Chancellor Jeremy Hunt’s spring budget kept Sterling on its toes.

A more ‘fiscally responsible’ budget is expected, with the pressure remaining on the Chancellor to try and alleviate some of the UK’s economic problems. Earlier on Wednesday, Hunt announced that the existing energy price support initiative would be extended for another three months, with the aim to provide further support to UK households.

In a statement, Hunt added: ‘High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level. With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.’

However, Sterling’s increasingly risk sensitive nature meant the currency was unable to consolidate the gains afforded by this optimism. With the market mood turning increasingly sour over the morning, the Pound began to weaken against most of its safer peers.

Australian Dollar (AUD) Weakens amid Souring Market Mood

The Australian Dollar (AUD) weakened on Wednesday morning as risk appetite began to recede across the markets.

This meant that the ‘Aussie’ was unable to hold onto its gains made during overnight trade, which saw the Chinese proxy currency strengthen amid upbeat data releases. Between improving industrial production and a strong recovery in retail sales, the world’s largest economy continues its economic reopening following the pull back from zero Covid.

However, the recent instability amongst American banks continued to bring down the market mood, prompting a shift to risk averse trade. With more US banks in increasingly precarious positions, further anxiety over the US’ economic standpoint and how much more tightening it can withstand may have caused downbeat trade.

Escalating tensions in the Ukraine Russia war may have contributed to the sombre market mood, following the collision between a US Reaper Drone and a Russian fighter jet on Tuesday. As the first known contact between Russia and the US in the war, it prompted anxieties amongst investors.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: RBA Bulletin to Buoy AUD?

Looking ahead for the Australian Dollar (AUD), the core catalyst of movement in the short term is likely to be a series of data releases published overnight on Wednesday.

Firstly, the latest unemployment rate data is forecast to print at 3.6%, showing a decrease in February. If this prints accurately, signs of a tight labour market could boost the ‘Aussie’.

On top of this, the Reserve Bank of Australia (RBA) is expected to publish a bulletin. With the RBA being a frequently dovish bank, their cautious attitude may be appreciated due to the recent collapse of the Silicon Valley Bank (SVB). However, if they strike a hawkish tone, the ‘Aussie’ could rally on increased rate hike bets.

For the Pound (GBP), the data calendar turns thin towards the end of the week. Because of this, Sterling may be left vulnerable to external factors. If the market mood remains downbeat, GBP could weaken due to its increasingly risk sensitive nature.

However, if the UK government’s spring budget proves upbeat, the Pound could rally on an optimistic outlook for the UK economy.

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TAGS: Pound Australian Dollar Forecasts