GBP/AUD Exchange Rate Volatile Today as RBA Rate Decision Remains in Focus

GBP/AUD Exchange Rate Fluctuates as RBA Policy Meeting Remains in Spotlight

The Pound to Australian Dollar (GBP/AUD) exchange rate is trading in a wide range this morning as investors remain focused on yesterday’s Reserve Bank of Australia (RBA) rate decision.

At the time of writing GBP/AUD is holding close to today’s opening levels, after fluctuating in a range of around half a cent in overnight trading.

Australian Dollar (AUD) Fluctuates as Markets Digest RBA Rate Decision

The Australian Dollar continued to be hit by volatility during the Asian session as investors continued to dissect the language used in the RBA’s latest policy meeting.

Unsurprisingly the bank chose to leave interest rates on hold at 1.5% this month, suggesting that the current monetary policy was supportive of the stated aim of ‘sustainable growth and achieving the inflation target over time.’

However analysts are split on whether the language used by the bank hints at the RBA implementing a rate hike later in 2018 as many observers had initially forecast.

Some economists suggest the neutral tone of yesterday’s statement is evidence that the central bank will favour bolstering domestic growth over normalising monetary policy this year.

Meanwhile analysts from ANZ bank are a little more optimistic about the chances that the RBA will still deliver a rate hike this year.

ANZ expect that if wage growth has been shown to have accelerated at the end of last year then policymakers will be confident enough to begin tightening monetary policy.

David Plank, Head of Australian Economics at ANZ, said:

‘The Q4 wage data due on 21 February are shaping up as the key domestic release for the first half of 2018.’

‘If these data suggest that the apparent softness of the Q3 wage print was misleading then we think the RBA will still be on track to tighten in 2018.’

Pound (GBP) Muted as House Prices Slide

The Pound is struggling to advance this morning despite the uncertainty over the RBA, as Halifax reported that UK house prices fell again last month.

Data revealed that house prices dropped 0.6% in January, following on from a revised 0.8% decline the month before. This prompted annualised house price growth to slide from 2.7% to 2.2%.

The slide in prices also come despite a fall in the number of houses coming onto the market.

With a constrained inventory normally supporting a rise in prices, the drop suggests that financial uncertainty is likely prompting prospective house purchasers to avoid making major commitments.

GBP/AUD Exchange Rate Forecast: BoE to Hint at Rate Hike?

Looking to tomorrow, the Bank of England (BoE) will hold its first policy meeting of the year, with movement in the GBP/AUD exchange rate likely to be dictated by the outcome of the meeting.

While the BoE is not expected to hike rates again just yet, investors will be looking for any hints in whether policymakers have any plans to accelerate the pace of monetary tightening later in the year, given the UK’s better-than-expected growth in 2017.

Meanwhile the Australian Dollar may slide in the second half of the week, if the RBA’s quarterly policy statement on Friday appears to support suggestions that the bank will leave rates on hold this year.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail