Pound to Australian Dollar (GBP/AUD) Exchange Rate Rises as Bank of England Holds Interest Rates

GBP/AUD Exchange Rate Edges Higher Despite Concerns Over UK Unemployment Levels

The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.4% today, with the pairing currently fluctuating around AU$1.83.

Sterling edged higher today following the Bank of England’s (BoE) interest rate decision, which confirmed forecasts and was held at 0.1%.

However, the BoE, warned that UK unemployment levels could hit 2.5 million, leaving many Pound investors concerned for the British economy in the months ahead.

The BoE said in its monetary policy report:

‘In the MPC’s projections, unemployment rises to around 7½% by the end of the year as some workers are made redundant and hiring remains subdued.

‘That would represent around 2½ million people out of work and searching for jobs (Chart 4.2), the highest total since 2013, and a clear sign of spare capacity in the economy.’

In other UK economic news, today saw the UK’s construction PMI for July rise above forecast from 55.3 to 58.1. As a result, GBP investors have become more hopeful for Britain’s economic recovery in the months ahead.

Tim Moore, Economics Director at IHS Markit, commented:

‘Construction companies took another stride along the path to recovery in July as a rebound in house building helped to deliver the strongest overall growth across the sector for nearly five years. Civil engineering and commercial activity are also back in expansion, which has been mainly due to the restart of work that had been delayed during the second quarter of 2020.’

Australian Dollar (AUD) Sinks as Concerns Grow Over Australia’s Domestic Economy

The Australian Dollar (AUD) struggled today owning to growing concerns over Australia’s domestic economy. With forecasts growing darker and unemployment woes continuing to weigh on confidence in the ‘Aussie’.

Joel Kruger, analyst at LMAX Exchange, commented:

‘Overall, Aussie has been well bid, on the back of broad based US Dollar outflow. Still, with the risk outlook shaky, and worry associated with the coronavirus ticking back up (as reflected by the latest measures in Victoria), we suspect additional upside will be limited for the time being.’

In Australian economic news, today will see the release of the AiG Performance of Services Index for July. Any improvement could boost the ‘Aussie’.

GBP/AUD Outlook: Could a Dovish RBA Weigh on the Australian Dollar Tomorrow?

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of the Reserve Bank of Australia’s (RBA) Monetary Policy Statement. Any dovishness about Australia’s economic progress would prove AUD-negative.

Tomorrow will also see a speech from the RBA’s Assistant Governor, Luci Ellis. Again, if the Bank is notably downbeat about the economy’s recovery, then we could see ‘Aussie’ suffer.

The GBP/AUD exchange rate could rise if the UK’s economic outlook is improved by July’s UK Halifax house prices figure. If these show a marked improvement, then we could see Sterling edge higher.

David Moore

Contact David Moore