Pound to Australian Dollar Exchange Rate Forecast: GBP/AUD Set to Climb as UK Wages Continue to Rise

Global Geopolitical Worries Support GBP/AUD Exchange Rate

Rising global geopolitical tensions bolstered the Pound to Australian Dollar (GBP/AUD) exchange rate over the course of the last week.

Fears that the US and Russia could come to blows over Syria weighed heavily on the risk-sensitive Australian Dollar (AUD), even as trade concerns started to ease.

Even though April’s Australian consumer inflation expectation report remained rather optimistic, showing inflation of 3.6%, this was not enough to rally the antipodean currency.

With investors largely favouring safe-haven assets ahead of the weekend there was little scope for AUD gains, especially as the Reserve Bank of Australia (RBA) looks set to remain on hold for longer.

GBP Exchange Rates Shrug Off Disappointing NIESR GDP Forecast

Although the National Institute of Economic and Social Research (NIESR) gross domestic product for the first quarter of 2018 proved weaker than forecast this failed to knock back the GBP/AUD exchange rate.

While signs point towards a continuing loss of momentum within the UK economy this was not enough to shake bets that the Bank of England (BoE) will deliver another interest rate hike imminently.

In the absence of any fresh Brexit developments investors maintained a general air of confidence in the domestic outlook, with some of March’s slowdown attributable to severe weather conditions.

As a result, the GBP/AUD exchange rate was able to largely recover its initial lost ground.

Hawkish RBA Minutes Unlikely to Alter Pound to Australian Dollar Exchange Rate Outlook

The impact of the RBA’s latest meeting minutes on the GBP/AUD exchange rate is likely to be relatively limited given the nature of recent policymaker comments.

Even if the minutes reaffirm the next interest rate move is set to be up, the Australian Dollar could struggle to capitalise on this.

With any interest rate hike still looking to be a fairly distant prospect at this stage the appeal of AUD is unlikely to pick up significantly any time soon.

However, AUD exchange rates could find some additional support on the back of Thursday’s raft of Australian labour market data releases.

As forecasts point towards a fresh dip in the unemployment rate, from 5.6% to 5.5%, confidence in the outlook of the Australian economy may improve.

Even so, the more volatile nature of the jobs report could still limit the negative impact of a stronger showing on the GBP/AUD exchange rate.

Solid UK Inflation and Wage Growth Forecast to Boost GBP/AUD Exchange Rate

Fresh pressure looks to be in store for the GBP/AUD exchange rate over the coming week with the release of the latest UK wage growth and inflation data.

Any uptick in inflationary pressure would give the BoE additional encouragement to consider a May interest rate hike.

Strengthening average weekly earnings may offer further support to the Pound, easing policymaker concerns over the lacklustre nature of recent domestic wage growth and the year-long wage squeeze.

Weaker figures could see the Pound trending lower against its rivals, signalling continued softness within the domestic economy and lowering hopes for a resurgence in consumer spending.

If March’s UK retail sales figure shows a contraction on the month as forecast this is likely to dent the GBP/AUD exchange rate.

Hannah Wilson

Contact Hannah Wilson