Pound Gains Amid Market Caution, But RBA Hike Expectations Loom
The Pound to Australian Dollar exchange rate has been trending higher, up around 0.3% from the start of Tuesday's opening levels, trading at AU$1.8958.
This increase comes as a cautious market mood weakened demand for risk-sensitive assets like the 'Aussie', although renewed military tensions between the US and Iran triggered a deterioration in market risk appetite.
The Australian Dollar faced modest selling pressure on Tuesday, but was partially offset by some encouraging Chinese economic data. China's private RatingDog Manufacturing PMI rose to 51.5 in August from 50.9 in July, exceeding expectations and likely feeding greater demand for Australian exports.
The Pound traded in a relatively narrow range against most of its other peers on Tuesday, as UK markets reopened following Monday's bank holiday to a sharp rise in government borrowing costs. UK 10-year gilt yields climbed to around 5.24%, their highest level since 2008, fuelling expectations that central banks may need to maintain tighter monetary policy.
The near-term GBP/AUD forecast is looking uncertain, with the publication of the UK's latest GDP figures due on Wednesday expected to show a steady pace of growth in the Australian economy. This could underpin bets that the Reserve Bank of Australia will deliver an interest rate hike later this month.