Update: Pair of Hawkish BoE Officials Boost Pound to Australian Dollar Exchange Rate (GBP/AUD)
Following today’s Bank of England (BoE) interest rate decision, the Pound to Australian Dollar exchange rate has risen by 0.7%.
Sterling has advanced further in the pairing thanks to details of the BoE rate decision, which saw no change to interest rates as expected.
Optimistic analysts focused on the composition of policymaker votes – two of the nine voting members backed higher interest rates.
Suggesting that a May interest rate hike is still firmly on the table, Kallum Pickering of Berenberg Bank said;
‘These are the same members that dissented ahead of the November hike. The March minutes strengthen the bank’s February guidance that a hike could come soon. The real question is, when will it happen?’.
GBP/AUD Exchange Rate Soars on Cautious Optimism about BoE Monetary Policy Meeting
The Pound to Australian Dollar exchange rate (GBP/AUD) has firmed today, due mainly to AUD weakness more than anything else.
UK economic data today has been mixed, showing growth in month-on-month retail sales during February but slowing year-on-year activity.
Summing up the stats, Office for National Statistics Senior Statistician Rhian Murphy said:
‘The underlying three-month picture is one of falling sales, mainly due to strong declines across all main sectors in December.’
Expectation of Hints about Upcoming BoE Interest Rate Hike Keep GBP/AUD Exchange Rate Positive
The latest Pound to Australian Dollar gains have been partly enabled by rising optimism about today’s Bank of England (BoE) interest rate decision.
Economists have been speculating about whether the UK central bank could hint at an upcoming interest rate hike, given the recent supportive data.
Inflation slowed by more than expected this week, while UK wage growth has also picked up, narrowing the gap between prices and incomes.
Touching on the attitude among GBP traders, ADS Securities Head of Research Konstantinos Anthis said:
‘All these factors paint a positive outlook for the Pound and shape expectations for a bullish BoE message which will underpin investors’ hopes for a rate hike soon.’
Australian Dollar to Pound (AUD/GBP) Exchange Rate Slumps after Unemployment Rises above Forecasts
Unexpected growth in the Australian unemployment rate in February has devalued the Australian Dollar, leading to a significant -0.6% decline against the Pound.
The jobless rate in February rose from 5.5% to 5.6%, while the number of employed people during the month rose by 17.5k instead of the predicted 20k.
Australian economists responded negatively to the news, with Sarah Hunter of BIS Oxford Economics warning that:
‘It will take at least a year of continued jobs growth before we use up all the spare capacity in the labour market and start to see upward pressure on wage growth. Wage rises are currently tracking inflation, leaving the average worker no better off than a year ago in real terms.’
As such, the Reserve Bank of Australia (RBA) is now seen as unlikely to be considering near-term monetary policy adjustment.
Pound to Australian Dollar Exchange Rate Forecast: Will GBP/AUD Rise Further on BoE Interest Rate Decision?
There is a chance the Pound will extend its gains against the Australian Dollar today, when the Bank of England (BoE) announces its interest rate decision at noon.
The UK central bank is not expected to adjust interest rates from their current 0.5% level, but the Pound could still advance if there are hints of an upcoming interest rate hike.
There will be two factors to focus on – the BoE’s minutes for its latest Monetary Policy Committee (MPC) meeting, and the press conference given by BoE Governor Mark Carney.
The minutes will detail what took place during the latest meeting, and may show that a majority of BoE officials are considering higher interest rates in the coming months.
Additionally, if Mr Carney gives a positive reaction to the recent inflation and wages data then the Pound could rise further on hopes for tighter BoE monetary policy.
The next major Australian data release is a long way off on 2 April, so before then the AUD/GBP exchange rate could be influenced by any major US Dollar fluctuations.
A stronger US Dollar generally means that risk-prone currencies like the Australian Dollar are devalued, so if the US Dollar rises in the near-term the AUD/GBP exchange rate could worsen.