The Pound to Australian dollar (GBP AUD) exchange rate has stayed at a rather narrow range for a while now. This is because traders have remained cautious while waiting for reports on US inflation. If we were to convert 1GBP to AUD, we would find a figure of $1.95, which it has stuck close to for the last few weeks.
There are other factors that are in play, however, which could affect the future trajectory of the rate.
GBP and AUD: Individual Behaviour of Currencies
The most important factor for the AUD rate would be the worries about Australia’s geopolitical situation. Trades surrounding the AUD have been unpredictable, as the market has generally been chaotic. While US inflation data is indeed important, we should consider the problems surrounding US-China relations. Due to Australia’s location and its close trade relations with both countries, it is greatly affected by the deterioration in relations.
Most recently, Biden has signed an executive order. It reduces US investment in Chinese tech. This includes a vast array of things, from AI to semiconductors. All are very important for tech innovation.
The pound has been facing rather different circumstances. The data on the UK’s economy has been slight. Therefore, the pound has not made any great moves recently, keeping the GBP AUD exchange rate steady. Upcoming GDP growth reports could greatly affect how traders will soon view the currency. Concerns around the state of the economy are likely to persist in any case.
There is some hope that a recession will not occur in the UK, which would most certainly keep the pound afloat. Inflation has been reducing, and consumer spending has been lowering as well. Some believe that growth will be slight for Q2. Inflation stands at around 8%, a far cry from the 2% target. Investors will likely feel relief if growth is made despite this inflationary pressure. This could eventually result in a rise in the Sterling.
These are the additional factors that could affect the GBP to AUD forecast. It shall remain to be seen if the GBP AUD exchange rate suddenly breaks out.
