Pound Australian Dollar (GBP/AUD) Exchange Rate Down as Investors Respond to Weaker USD

June 22, 2018 – Written by John Cameron

BoE Haldane Throws in with the Hawks – Pound Australian Dollar (GBP/AUD) Exchange Rate Outlook Improves

The Pound Australian Dollar (GBP/AUD) exchange rate traded lower on Friday, falling as investors responded to a weaker US Dollar (USD) by buying into riskier assets like the Australian Dollar.

This occurred despite a rising tide of optimism for the Pound, with yesterday’s Bank of England (BoE) rate decision yielding a surprising rise in the number of hawkish votes.

BoE Chief Economist Andy Haldane was perhaps the most surprising, with his decision to throw in with hawks Ian McCafferty and Michael Saunders seeming to illustrate that a rate rise is nigh – as nigh as August, perhaps.

Mr Haldane cited the current strength of the UK’s labour market and the above-target inflation rate in his decision, arguing that both necessitated an immediate rate rise.

It should also be pointed out, however, that uncertainties remain regarding the Brexit negotiation process, with subpar business investment still under careful scrutiny by members of the Monetary Policy Committee (MPC).

Australian Dollar (AUD) Exchange Rates Improve, but Outlook Remains Poor

The Australian Dollar clawed back some of its recent losses on Friday, but concerns remained regarding a large variety of factors, including the current cautiousness of Australia’s central bank and escalating trade tensions between their two primary export markets, China and the US.

The ‘Aussie’ Dollar siphoned demand away from the weaker ‘Greenback’, with investors fleeing USD after yesterday’s rather sharp drop in the Philly Fed manufacturing index.

Whether this will persist, however, remains to be seen, particularly with the US Federal Reserve moving towards another two rate rises this year and trade tensions boiling away between the world’s superpowers.

On ecostat front, the data drought continues, with today and next week featuring very little of significance for the Australian economy.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: US PMI Readings in the Spotlight

The next major even for the GBP/AUD exchange rate will likely be today’s raft of US Markit PMI readings, with any signs of weakness liable to extend the ‘Aussie’ Dollar’s support.

Investors are currently slightly concerned that threats of a tariff exchange with China will have weighed on business optimism, potentially reducing the score of the PMI readings and leaving the US Dollar floundering.

If this occurs then the Pound Australian Dollar (GBP/AUD) exchange rate could end the week on a sour note.

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TAGS: Pound Australian Dollar Forecasts