Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast to Strengthen as UK Business Optimism Slides

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Pound Sterling (GBP)

The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate edged higher by around 0.25% early during Monday’s European session.

Although disappointing data out of China and dampened market sentiment weighed on demand for the ‘Aussie’ (AUD), the South Pacific asset ticked higher versus many of its major competitors. The appreciation can be linked to a significant gain in gold prices as a result of demand for safe-haven assets.

The Pound, meanwhile, declined versus most of its major peers in response to disappointing business optimism. Additional losses can be attributed to mounting political uncertainty as we draw ever closer to the general election.

The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5165.

Australian Dollar (AUD) Exchange Rate Edges Higher on Gold Prices

China’s Industrial Profits cooled by -0.4% in March on the year, adding to the previous declination of 8.0%. In the immediate aftermath of the publication the ‘Aussie’ slumped versus most of its major peers. Aiding the declination was generally damp market sentiment as geopolitics in Europe weighed on demand for high-yielding assets.

The South Pacific asset recovered some of its losses later in the European session, however, with gold prices rising significantly. The increase in price can be linked to a weaker US Dollar and heightened demand for safe-haven assets. ‘The prospect for a less than hawkish change to the FOMC statement would likely remove some of the near-term pressure that has been baked into the gold price,’ said HSBC analyst James Steel, referring to the Federal Open Market Committee.

The forthcoming speech from Reserve Bank of Australia (RBA) Governor Glenn Stevens will be of interest to those invested in the South Pacific asset. With opinion divided as to whether the institution will be forced to cut the cash rate during the next policy meeting, the speech ought to give some clues and will be scrutinised closely.

The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate has fallen to a low of 0.5142 during Monday’s European session.

Pound Sterling (GBP) Exchange Rate Softens ahead of General Election

With heightened political uncertainties weighing on investor confidence as we draw ever closer to the general election, the Pound has generally softened over the past few weeks. Opinion polls are giving differing results, none of which indicate a clear majority for any major party.

Aiding the Sterling downtrend was disappointing domestic data. The CBI Business Optimism Index dived from 15 to 3 in the second-quarter, despite the median market forecast of a fractional drop to 14.03. CBI Industrial Trends Orders managed to improve from 0 to 1 in April, but failed to meet with the market consensus of a rise to 4.

Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast to Hold Gains

Given that the rapidly-approaching general election is weighing heavily on demand for the Pound, and with gold prices showing no sign of softening, the Australia Dollar to Pound Sterling (AUD/GBP) exchange rate is likely to hold gains for the remainder of Monday’s European session.

The Australasian session could see AUD/GBP volatility with RBA’S Governor Stevens due to make a speech. Any signal that policymakers plan to reduce the benchmark interest rate during the next policy meeting will likely see the South Pacific currency soften considerably.

The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate climbed to a high of 0.5166.

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