The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate gained by around 0.64% on Thursday afternoon.
After the European Central Bank (ECB) announced an extensive programme of quantitative easing, the Australian Dollar strengthened versus many of its major peers. This can be attributed to heightened demand for gold as uncertainties regarding the effectiveness of the ECB stimulus saw traders flock to safe-haven assets.
The Pound Sterling, meanwhile, is generally trending higher versus most of its currency rivals as a result of the prospect of cheaper trade with Europe. A positive speech from Bank of England (BoE) policymaker David Miles also supported demand for the Pound.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5378.
As explained above, the announcement from the ECB to initiate a programme of quantitative easing has seen a surge in demand for gold. Given that traders were not expecting the ECB to be as aggressive as they were, risk-aversion strategies dominated trading in the aftermath of the announcement.
‘Gold is reacting to what Draghi has to say, to the bigger package that was announced and to rebounding inflation expectations in the Eurozone,’ ABN Amro analyst Georgette Boele said.
The advantage of cheaper trade with Europe also supported the ‘Aussie’ (AUD) surge.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate dropped to a low today of 0.5319.
The Pound Sterling is generally trending higher versus most of its major peers on Thursday despite disappointing public finances data. The appreciation can be attributed to BoE policymaker David Miles suggesting that falling inflation shouldn’t prompt looser monetary policy.
‘So although actual inflation rate is now very low, and might temporarily dip down to zero and turn slightly negative, this is a long way from the sort of deflation trap that is really worrying,’ he said.
The ECB expansive measure also has the potential to support a Sterling appreciation thanks to cheaper trade.
Given the lack of data to provoke changes, and with gold prices continuing to rise, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is likely to hold gains for the remainder of Thursday.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate climbed to a high today of 0.5387.
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