Optimistic Outlook from BoE Governor Mark Carney Boosts GBP/AUD Exchange Rate Today
UPDATE: The Pound (GBP) has risen slightly against the Australian Dollar (AUD) today, trading near a two-week high in the pairing.
These gains in the GBP/AUD exchange rate have come after comments from Bank of England (BoE) Governor Mark Carney.
Speaking in Newcastle (England), Mr Carney has asserted that slow UK growth in early 2018 was temporary, rather than a sign of underlying economic weakness.
While this wasn’t an explicit comment on interest rates, Mr Carney’s remarks have intensified speculation that there could be a BoE interest rate hike in August.
GBP/AUD Exchange Rate Ticks Lower ahead of Key Brexit Cabinet Meeting
UPDATE: The Pound (GBP) has continued to advance against the Australian Dollar (AUD) today, but to a lesser degree.
Compared to this morning’s trade, the GBP/AUD pairing has since dipped to AU$1.78 at the interbank rate.
This minimal decline in GBP/AUD is down to growing tensions about Friday’s meeting at the Prime Minister’s country retreat, Chequers.
PM Theresa May is expected to present a ‘third option’ to solve customs issues with the EU after Brexit, but it is unclear if this will be accepted.
According to ITV’s Political Editor Robert Peston, the PM is tipped to present an option which would represent the ‘softest possible Brexit’.
This might reassure those worried about Brexit-related damage, but could receive a sharp rebuttal from pro-Brexit MPs who are attending the meeting.
A failure to agree on a fresh approach to the customs union might panic GBP traders and could cause GBP/AUD losses before the weekend.
Surprise Services PMI Growth Pushes GBP/AUD Exchange Rate Higher
The Pound (GBP) has made tentative gains against the Australian Dollar today, rising to a level of AU$1.79 at the interbank exchange rate.
This GBP appreciation has been caused by June’s services PMI, which has unexpectedly risen from 54 points to 55.1.
The reading is especially important for the UK, as the services sector is the single largest contributor to national economic growth.
Warning over Brexit Price Hike Limits Daily GBP/AUD Exchange Rate Movement
While the earlier services stats have supported the Pound today, GBP/AUD exchange rate gains have been limited due to uncertainty about the consequences of Brexit.
Costs are the latest area to come under scrutiny, with a pair of reports estimating that regions outside London will see the largest increases in bills after the UK separates from the EU.
Australian Retail Sales Recovery Fails to Bring AUD/GBP Exchange Rate Gains
There has also been positive economic news from Australia today, although in contrast to the UK data, Australia’s retail sales stats have failed to trigger an AUD/GBP advance.
Retail sales growth during May has beaten forecasts, rising by 0.4% instead of the predicted 0.3%.
While not terribly impressive on paper, this result was still viewed optimistically by Capital Economics’ Paul Dales, who said:
‘After rising by just 0.3% in the first quarter, real consumption may have risen by up to 0.7% in the second quarter.’
Pound Sterling to Australian Dollar Exchange Rate Forecast: GBP/AUD Gains ahead on Carney Speech?
With this week’s trio of UK PMI readings now out, there is only one salient economic event left that could affect Pound Sterling to Australian Dollar (GBP/AUD) exchange rate movement.
This is Thursday morning’s speech from Bank of England (BoE) Governor Mark Carney, who will be speaking during a visit to North East England.
If he touches on the possibility of an August interest rate hike in response to today’s strong services PMI reading, then the GBP/AUD exchange rate could rise sharply.
That said, any remarks about future monetary policy are not guaranteed, so the Pound might end up moving little on Mr Carney’s comments.
The week’s last Australian economic data will come much later on Thursday, when construction activity stats for June are released in the evening.
Last month’s construction index is tipped to show a minor increase in sector activity, which could cause AUD/GBP exchange rate gains late in the day.