Australian Dollar Slips against Pound as Investors Buy Sterling on Lows
The Australian Dollar to Pound currency pair slipped slightly during Tuesday’s European session as investors bought the Pound following its recent multi-year lows, following two full sessions of Sterling losses on Friday and Monday.
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Australian Dollar (AUD) Movement Mixed, Risk-Sentiment Improves Slightly
After being negatively affected by the Brexit result of last week’s EU Referendum, the Australian Dollar experienced a little relief on Tuesday alongside its other risk-correlated peers.
Risk-sentiment had been decidedly off after Friday morning’s shocking UK news as investors moved away from risky investments into ‘safe-havens’.
However, with many risky assets reaching cheap levels by Monday evening, markets indulged in some profit taking on Tuesday. Movement was limited however, indicating that this rally would not last. The price of iron ore, Australia’s most lucrative commodity, have also been performing positively this week which may add to ‘Aussie’ sentiment.
The ‘Aussie’ actually dropped against the Pound, as Sterling had dropped in price more than any other currency and was therefore considerably cheap to purchase.
AUD/GBP has soared since Friday, and while it has slipped from Monday’s high of 0.5623 it still remains well above last week’s levels of around 0.51. The pair fluctuated in the region of 0.5545 during Tuesday’s European session.
Pound Sterling (GBP) Attempts Recovery Despite Poor Market Sentiment
While some analysts predicted a long period of solid losses for the Pound, Tuesday’s session saw the Pound understandably recover slightly as investors bought it from its cheapest levels.
However, while markets were calmer compared to the atmosphere seen on Monday and Friday, fears and concerns about Britain and the Pound remained high.
UK Prime Minister David Cameron is set to step down in the next few months, with recent news suggesting that his successor could be named by early September. Current favourites to win the position include ‘Leave’ camp figurehead Boris Johnson, as well as home secretary Theresa May.
Britain’s Labour party has also been in crisis, with many front-bench MPs resigning from their positions due to a lack of confidence in leader Jeremy Corbyn. Corbyn has claimed that he intends to maintain his leadership and strengthen the party.
With news that various ratings agencies had downgraded the UK’s credit rating shocking markets further on Monday, pressure remains high and investors stay poised to sell the Pound at any point.
Australian Dollar to Pound Exchange Rate Forecast: ‘Aussie’ Sentiment Could Recover
Global forex markets are still in shock following Friday’s EU Referendum result, with less than a week having passed since markets were pricing in a ‘Remain’ vote.
As a result, movement throughout the market has been related almost entirely to news of Britain’s exit from the European Union. As this calms, the Australian Dollar is more likely to move more independently of market-wide risk-sentiment.
The Pound recovered slightly against the ‘Aussie’ on Tuesday, despite Australian market sentiment remaining well above Britain’s.
Investors will want to maintain their focus on central banks going forward, with the Bank of England (BoE) and Reserve Bank of Australia (RBA) both speculated to announce easing measures in the coming months to stave off economic damage.
If prices of iron ore remain sturdy and risk-sentiment begins to be influenced by non-Brexit events again, the ‘Aussie’ is likely to make further sustained gains against Sterling. On the other hand, investors will certainly be more cautious with risk-correlated currencies going forward.
At the time of writing, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate trended in the region of 0.5545, while the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate traded at around 1.8030.