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Pound Australian Dollar (GBP/AUD) Exchange Rate Boosted By Appointment Of Sunak As UK PM

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Pound Australian Dollar (GBP/AUD) Exchange Rate Boosted by Appointment of Sunak as UK PM

Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs amid BoE Rate Hike Bets

The Pound Australian Dollar (GBP/AUD) exchange rate rose on Tuesday. The currency pair found support from the appointment of Rishi Sunak as UK Prime Minister. Signs that the Bank of England (BoE) will push ahead with further interest rate hikes also lent support to GBP/AUD.

At time of writing the GBP/AUD exchange rate was at around $1.7926, which was up roughly 0.3% from the morning’s opening figures.

Pound (GBP) Exchange Rates Jump as Sunak Enters Office as UK PM

The Pound leaped on Tuesday as markets took confidence from the appointment of Rishi Sunak as the new UK Prime Minister. UK government bond yields fell over the course of the day.

Dean Turner, chief Eurozone and UK economist at UBS Global Wealth Management, said:

‘The market reaction to Johnson’s withdrawal and Sunak’s win has seen gilt yields fall sharply across the curve, while the pound has been steady against the major crosses. Sunak’s victory will not call a halt to the political volatility in the UK, but the temperature should cool significantly.’

Confirmation that Jeremy Hunt would remain UK Chancellor ahead of the 31 October statement on financial policy also bolstered the Pound. The Bank of England (BoE) Deputy Governor Dave Ramsden echoed the market’s sentiment, stating that ‘credibility is being recovered’.

The currency also saw a boost amid renewed expectations of upcoming interest rate hikes from the Bank of England (BoE). A survey released on Tuesday by Reuters found that majority of economists favored a 0.75% rate hike.

bannerA drop in confidence in the UK’s manufacturing sector capped gains for Sterling, however. Data released by the Confederation of British Industry (CBI) indicated confidence in the sector falling at its fastest pace since the first UK Covid-19 lockdown.

Australian Dollar (AUD) Drops Against Pound, Underpinned by Sensible Budget

The Australian Dollar climbed against many of its rivals today following a well-received government budget. A risk-off mood weighed on the ‘Aussie’ however, prompting losses against a resurgent Pound.

The first budget from Australia’s Labor government put common sense and stability at the forefront, bolstering confidence in AUD. The budget also lent support to the Reserve Bank of Australia (RBA) which further boosted the currency.

Martin Petch, vice president of Moody’s Investors Service, had a positive view on the budget:

‘In this context of substantial long-term spending pressures and higher costs of debt servicing, lifting Australia’s relatively weak productivity performance will be critical to the fiscal repair supporting Australia’s credit outlook.’

Bets on continued interest rate hikes from the RBA also propped up the currency on Tuesday. Markets are betting on around 4% of rate hikes from the RBA to tame soaring inflation.

GBP/AUD Exchange Rate Forecast: Will Retail Sector Downturn add to UK’s Woes?

Looking ahead to the rest of the week for the Pound, October’s distributive trades figures could pull the currency lower if they print as forecast on Thursday. The data could add to the already downbeat outlook for the UK’s retail sector amid severely reduced household spending.

Also on Thursday, a speech from Bank of England policymaker Sam Woods could help underpin the currency. Investors will be looking to the BoE for hints of their forward policy, and any signals of further rate hikes could boost GBP.

The currency is also likely to be affected by any policy announcements from PM Sunak in the coming days.

For the Australian Dollar, third quarter inflation figures could help the currency to make gains on Wednesday if they rise as forecast. The data may also add to bets on further interest rate hikes from the RBA despite their cautious rhetoric.

Chinese industrial data on Thursday could temper these gains, however. Profits for the Chinese industrial sector are set to fall further in September.