The British pound was higher against the Australian dollar on Friday as global risk sentiment took a significant turn for the worse, sending stocks, commodities and commodity-sensitive currencies like the Aussie spiraling lower.
GBP/AUD was up by 40 pips (+0.18%) to 1.9635 with a daily price range of 1.9521 to 1.9678 as of 3pm GMT.
Pound to Australian dollar rate moved in a choppy sideways range, finding support below 1.955 and resistance above 1.965 before eventually settling higher. Losses for the week total -0.29%.
GBP was higher against most major currencies
The Pound was helped somewhat by reduced scope for an emergency Bank of England rate cut. If an unscheduled UK rate cut were to have happened, it would have needed to have happened already because the new UK budget is announced next week.
Newly-installed Bank of England Governor Andrew Bailey said in response to a question on an unscheduled UK rate cut that “The Monetary Policy Committee hasn’t in its history tended to do that but there is nothing that in the constitution of the Monetary Policy Committee to stop that happening.” He added “I think what we need frankly, is more evidence than we have at the moment, as to exactly how this is feeding through.”
The Australian dollar
The Aussie dollar remains a big proxy for risk sentiment and as stock markets globally have plunged in the last two days, the Aussie dollar has followed them lower. Against the pound the downturn in the Aussie has been more muted, and in fact at the time of wring looks like achieving a modest gain on the week.
Investors are flocking into the havens and out of assets perceived as riskier. Australia has a high level of foreign asset ownership and those foreign shareholders are pulling out their money fast and returning it to Europe and the United States. US, German and US bond yields all struck record lows on Friday amid the flight to quality. In forex markets the Japanese yen struck six-month highs as the Aussie fell amid the demand for havens.
