GBP/AUD Exchange Rate Stumbles as Australian Dollar Broadly in Line with RBA’s Targets

GBP/AUD Exchange Rate Slips Following RBA Rate Decision

The Pound to Australian Dollar (GBP/AUD) exchange rate is ticking lower this morning, after the Reserve Bank of Australia (RBA) indicated it is happy with the current strength of the ‘Aussie’.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7979, down roughly 0.3% from this morning’s opening rate.

Australian Dollar (AUD) Bolstered by RBA’s Take on Exchange Rates

The Australian Dollar (AUD) is trending higher against the Pound (GBP) and the majority of its other peers this morning in the wake of a speech by RBA governor Philip Lowe.

Ahead of the speech, there was some speculation that Lowe may use his annual speech to the Anika Foundation, as an opportunity to talk down the ‘Aussie’.

This comes in light of the Australian Dollar’s dramatic comeback in the past couple of months, having bounced back from a decade low at the height of the coronavirus crisis, to its best levels in almost a year.

Economists have expressed some concerns about the magnitude of the recovery, with such an appreciation potentially complicating Australia’s economic recovery through deflationary pressures.

However, Lowe dismissed the concerns in comments made ahead of his speech, suggesting the Australian Dollar is trading broadly in line with the fundamentals.

Lowe then helped to buoy the ‘Aussie’ further in his speech as he suggested that Australia’s economy has ‘turned the corner’, although he tempered his comments by warning that the recovery is likely to be ‘bumpy’.

Pound (GBP) Supported by V-Shaped Recovery Hopes

At the same time, the Pound (GBP) has been able to minimise its losses against the Australian Dollar (AUD) this morning amidst hopes the UK economy is enjoying a v-shaped recovery.

This comes in the wake of comments from Bank of England (BoE) chief economist, Andy Haldane who insists that the economy is rebounded sharply after the shock of the coronavirus crisis.

Speaking to MPs on Monday, Haldane claimed that the UK economy has been growing on average around 1% a week since May.

Haldane said:

‘Roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since.

‘We have seen a bounce-back. So far, it has been a V. That, of course, doesn’t tell us about where we might go next.’

However, Haldane’s comments fly in the face of his BoE peers, many of whom warn of an uneven recovery.

GBP/AUD Exchange Rate Forecast: Coronavirus Vaccine Hopes to Drive Markets?

Looking ahead, we may see the Pound to Australian Dollar (GBP/AUD) exchange rate extend its downside as the week continues.

This comes as the risk-sensitive ‘Aussie’ is likely to more directly benefit from growing optimism regarding a coronavirus vaccine.

Sterling, meanwhile, is also likely to face headwinds as a result of lingering Brexit uncertainty as GBP investors hold little hope for a breakthrough in the latest round of talks.

Matthew Andrews

Contact Matthew Andrews