GBP/AUD Exchange Rate Dips Following BoE Rate Decision
(Updated 13:15, 5/8/21) The Pound Australian Dollar (GBP/AUD) exchange rate is trending lower this afternoon, after the Bank of England’s latest policy statement made for some mixed reading.
On one hand the BoE has suggested that a ‘modest tightening’ of monetary policy may be necessary, ‘should the economy evolve broadly in line’ with its projections.
On the other hand, only one policymaker dissented on its vote regarding the tapering of its QE programme, with a 7-1 split in favour of leaving its bond purchases untouched disappointing GBP investors.
Alongside to the downgrade to the BoE’s latest 2021 economic forecasts, this appeared to be enough to undermine the Pound.
However, BoE Governor Andrew Bailey’s accompanying speech may yet send the GBP/AUD exchange rate higher.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Muted ahead of BoE Decision
The Pound Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning, as markets brace for the Bank of England’s (BoE) latest interest rate decision.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8799, virtually unchanged from this morning’s opening rate.
Pound (GBP) to be Bolstered by Hawkish Tilt from BoE?
The Pound (GBP) is currently stuck in a holding pattern this morning, as GBP investors are reluctant to place any aggressive bets ahead of the Bank of England’s Super Thursday.
No policy changes are expected from the BoE this month, but in light of the UK’s improving coronavirus statistics and some upbeat data releases in the second quarter, there is speculation amongst GBP investors that more policymakers will be inclined to push for the bank to start tapering its quantitative easing programme.
As such the vote composition regarding the BoE’s bond purchases is likely to act as a key catalyst of movement for the Pound today.
Most analysts are predicting a 6-2 split in favour of the BoE leaving its bond purchases unchanged this month. But a surprise 5-3 split would likely be viewed as a hawkish shift by the bank and could send the GBP/AUD exchange rate sharply higher this afternoon.
Alongside its latest interest rate decision, the BoE will also publish its latest economic forecasts this afternoon.
These could prove supportive of the Pound, if the BoE upgrades its growth forecasts to reflect the UK’s improving economic outlook.
Australian Dollar (AUD) Buoyed by Record Trade Surplus
Meanwhile, the Australian Dollar (AUD) traded with a spring in its step overnight, following the publication of Australia’s latest trade figures.
According to data published by the Australian Bureau of Statistics (ABS), Australia’s trade surplus climbed from A$9.26bn to a record A$10.49bn in June.
However, while the headline figures impressed, economists warn the trade figures have been inflated by surging commodity prices, which may have disguised a fall in actual economic activity.
Marcel Thieliant, senior economist for Japan, Australia and New Zealand at Capital Economics, warns:
‘Given that most of the rise in exports last quarter was driven by higher commodity prices, net exports probably provided another big drag on GDP growth in Q2. But we think that won’t last much longer.’
Pound Australian Dollar Forecast: Hawkish RBA Policy Statement to weigh on GBP/AUD?
Looking past the BoE’s rate decision, movement in the Pound Australian Dollar exchange rate at the end of this week could also be influenced by the publication of the Reserve Bank of Australia’s (RBA) latest policy statement on Friday.
The RBA surprised AUD investors earlier this week as it indicated it still plans to begin tapering its QE programme in September, in spite of Australia’s coronavirus resurgence.
Should RBA Governor Philip Lowe reinforce this hawkish shift as he delivers the bank’s policy statement, then the Australian Dollar could strengthen.