Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways as Risk Appetite Retreats

April 8, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways as Risk Appetite Retreats

Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound amid Risk-Off Trading

The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. A risk-off market mood is weighing on both currencies today as the conflict in Ukraine continues. A poor future outlook for the UK economy is also likely keeping pressure on the Pound (GBP) today.

At time of writing the GBP/AUD exchange rate is at around $1.7462, virtually unchanged from this morning’s figures.

Australian Dollar (AUD) Dips Despite Hawkish Signals from RBA

The Australian Dollar (AUD) is dropping against its rivals today amid a risk-off mood in the markets. The Ukraine-Russia conflict is seeing investors display renewed confidence in the US Dollar (USD). Significant losses for the ‘Aussie’ may be limited by high iron prices and a hawkish turn from the Reserve Bank of Australia (RBA).

Risk sentiment is likely to remain fragile after Ukrainian authorities reported today that at least 39 people after a rocket attack on a train station in Kramatorsk. Eyewitness accounts reported that thousands had been waiting at the station prior to the attack as they awaited trains to escape the city.

Significant losses for the Australian Dollar may be limited hawkish comments from the Reserve Bank of Australia (RBA). Speaking on Thursday, the central bank warned banks to maintain lending standards given the prospect of higher interest rates in the near future.

The RBA said:

‘With interest rates still at historically low levels, it is important that lending standards are maintained and that borrowers are prepared for an increase in interest rates.’

High iron ore prices may also be helping to prevent any major falls for the Aussie today. Demand for the commodity has continued to rise amid expectations that the Chinese government will provide stimulus to the country’s real estate sector.

Pound (GBP) Drops amid Gloomy UK Outlook

The Pound (GBP) is falling against the majority of its rivals today. A fragile risk appetite is likely continuing to weigh upon Sterling. A pessimistic outlook for the UK economy may also be keeping pressure on GBP today.

The suspected Russian attack on the city of Kramatorsk today is likely keeping bets on riskier currencies limited today. Russia has denied responsibility for the attack, stating that the country’s military had no missions planned in the city today.

Prospects of a fresh Russian offensive in the east of Ukraine have only increased following the attack.

Warnings from Germany’s Deutsche Bank of an imminent recession in the UK may also be keeping Sterling suppressed today. The bank is estimating that the UK economy will flatline at the end of 2023 as household energy bills spike in the colder months.

Deutsche Bank chief UK economist Sanjay Raja said:

‘This is something we will be tracking very closely in the coming months. Consumer confidence data is already consistent with recessionary levels.’

GBP/AUD Exchange Rate Forecast: Will UK Inflation Prompt BoE to Act?

Looking ahead to the coming week for the Pound, the UK’s GDP figures are forecast to fall on Monday. This could see Sterling slide following the data.

February’s unemployment rate is expected to remain unchanged on Tuesday. Should figures print as forecast, it could indicate an ongoing tightening of the UK labour market. This may in turn push GBP higher amid expectations of a rate hike from the BoE.

The BoE could also be prompted to act should UK inflation rise as expected on Wednesday. This could also cause a rise in the Pound.

For AUD, an expected significant fall in the business confidence index for March on Tuesday could pull the Australian Dollar lower with it. A forecast fall to consumer confidence for April could have the same effect should figures print as forecast on Wednesday.

Finally for the Aussie, employment figures on Thursday could help boost the currency. Figures are forecast to show a tightening of the country’s labour market.

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TAGS: Pound Australian Dollar Forecasts