In the course of Wednesday’s session, the Pound to Australian Dollar (GBP/AUD) exchange rate increased as the Pound (GBP) gained support from a positive report from the National Institute of Economic and Social Research (NIESR).
Following a two-day decline versus the Australian Dollar, the Pound got a breather today as optimistic investor sentiment was raised by NIESR projections.
Although it emphasized that it will still seem like a recession to many, the National Institute of Economic and Social Research stated that the UK is likely to escape a “technical recession” in 2023.
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Measures of “core” or underlying inflation imply that inflationary forces are still present in the UK economy notwithstanding drops in the headline rate.
Despite the release’s mixed message, traders for the sterling were relieved to hear any positive news given the disruptive labor unrest and decreasing sales growth.
A deteriorating market climate in the afternoon gave GBP even more support, increasing its value in comparison to its more volatile rivals.
The Federal Reserve Bank’s dovish comments yesterday, in which two members called for more interest rate increases, prompted bearish sentiment by raising concerns that the world economy may slow down.
President Xi Jinping of China stated that the nation will work to strengthen its economy, which raised optimism that the government may enact growth-promoting policies.
However, the speech did not come without consequences, as US President Joe Biden objected to Jinping’s apparent critique on Western democracy. In reaction to Biden’s defense of “American invention,” China said that the US was seeking to “smear” its policies.
Geopolitical unrest and diminished risk appetite go hand in hand, and as the European session got underway, the risk-off “Aussie” trended lower.
Furthermore, because the Australian dollar serves as a proxy for the Chinese economy, it always declines when there are political difficulties in China. The tension between Xi Jinping and Joe Biden weighs on the “Aussie” by dampening Chinese trade optimism.
If UK traders turn gloomy ahead of Friday’s GDP announcement, the Pound Australian Dollar exchange rate might experience an early decline into Thursday.
Investors will be anxiously anticipating the report’s release in light of recent information from the National Institute of Economic and Social Research to determine whether a recession is indeed likely to be avoided.
If consumer prices are revealed to have climbed to the central bank’s objective, statistics on Chinese inflation may provide some support for the Australian Dollar in other markets. However, AUD may decline more if investors take less risk due to rising global concerns.