Pound Australian Dollar (GBP/AUD) Exchange Rate Firms in BoE Driven Trade
The Pound Australian Dollar (GBP/AUD) exchange rate is rallying this morning, as bests the Bank of England (BoE) could soon hike interest rates are underpinning Sterling.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8493, up roughly 0.3% from this morning’s opening levels.
Pound (GBP) Bolstered by BoE Rate Hike Speculation
The Pound (GBP) is on the rise against the Australian Dollar (AUD) this morning, reversing some of yesterday’s losses.
This upswing in Sterling appears to be primarily driven by rising expectations that the BoE could begin hiking interest rates by the end of 2021, amidst concerns over a sharp rising in inflationary pressure in the UK.
The rate hike speculation also comes in spite of attempts by one member of the BoE Monetary Policy Committee (MPC) to cool expectations yesterday.
BoE policymaker, Silvana Tenreyro said:
‘The prices go up, but they don’t keep going up sustainably, so you have a one-off price effect and in that sense inflation should be transitory. Raising interest rates to counter higher semi-conductor or energy prices would be self-defeating.’
Australian Dollar (AUD) Buoyed in Risk-On Trade
At the same time, whilst it is currently on the backfoot against the Pound, the Australian Dollar (AUD) struck higher against the majority of its peers during today’s Asian trading session, as an upbeat market mood underpinned support for the ‘Aussie’.
This improvement in market sentiment appears to be partly driven by weakness in the US Dollar (USD) which is making high-yield currencies like the Australian Dollar (AUD) more attractive to investors.
The upside in the ‘Aussie’ is also supported by a commodity price squeeze, which has made commodity-linked currencies more attractive to investors in recent weeks.
AUD exchange rates are particularly supported by the recent surge in coal prices, which as Australia’s second largest export, could pave the way for the country to post a new record trade surplus in September.
Pound Australian Dollar Forecast: Strong UK Inflation to Bolster Sterling?
Looking ahead to next week’s session, the Pound Australian Dollar exchange rate may rally again next week, following the publication of the UK’s consumer price index.
With the BoE’s recent rhetoric revealing the bank is particularly concerned by the potential impact of rising inflation pressure in the UK, Septembers CPI figures could have a notable impact on GBP/AUD trading dynamics, with the Pound likely to firm if domestic inflation rose above expectations again last month.
In the meantime, the publication of the minutes from the Reserve Bank of Australia’s (RBA) October policy meeting will be the primary focus for AUD investors in the first half of next week. Will some cautious optimism from the bank offer some support to the Australian Dollar?