GBP/AUD Exchange Rate Strengthens on Expectations of August Rate Hike from the BoE
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate accelerated by over a cent in the latter half of this week’s session, with markets flocking to the Pound as anticipation rose that the Bank of England (BoE) could deliver an August rate hike.
At the time of writing the GBP/AUD exchange rate is virtually unchanged from today’s opening levels, but looks set to close the week’s session around a cent higher.
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Buoyed by Hawkish Shift in the BoE
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate saw significant movement on Thursday, with the pairing striking a new one-month high in the wake of the BoE’s latest rate decision.
While the BoE’s decision to leave interest rates on hold this month came as no surprise to investors, traders were surprised to see that the vote had been split 6-3 as the bank’s Chief economist, Andy Haldane voted for an immediate hike.
Haldane’s vote was seen as a significant sign for many observers as he had previously been viewed as one of the BoE’s most dovish members, having voted against the bank’s decision to raise interest rates last November.
The outcome prompted a notable jump in the Pound, with investors flocking to the currency amid speculation the spilt signalled that a hike from the BoE by the end of the year looks increasingly likely.
Australian Dollar (AUD) Exchange Rate Muted as RBA Hike Expectations Tumble
Meanwhile the Australian Dollar (AUD) is also being driven by central bank rate expectations this morning, with markets speculating on whether the Reserve Bank of Australia (RBA) is likely to follow the other major banks in tightening monetary policy in the near future.
Unfortunately for the ‘Aussie’ however the overriding feeling from analysts is that the RBA is still some way off its next hike.
In fact even some of the most hawkish forecasters have shifted their positions recently, with Macquarie Bank saying:
‘We have had a re-think of the likely course for Australian interest rates. Three months ago we pushed back to February 2019 the timing for when we thought the RBA would begin gradually lifting the cash rate. We are now changing our call.
We now expect the RBA won’t need to lift the cash rate until early 2020, with the timing risks evenly balanced.’
GBP/AUD Exchange Rate Forecast: Uptick in Retail Activity to Bolster Sterling?
Looking ahead to next week’s session, the GBP/AUD exchange rate looks poised to extend its gains with the publication of the Confederation of British Industry’s (CBI) latest Distributive Trades index.
Economists forecast the data will reveal that the UK’s retail sector continued to strengthen in June, with the index expected to have have ticked up from 11 to 15.
Meanwhile a lull in notable domestic data could hinder the Australian Dollar (AUD) next week, with the ‘Aussie’ being left vulnerable to further weakness should US-China trade tensions continue to dominate market sentiment.