Pound Australian Dollar Exchange Rate Climbs Following Hawkish Signal from the BoE
The Pound Australian Dollar (GBP/AUD) exchange rate is firming this morning, with the pairing climbing roughly half a cent since this week’s session opening, in response to some comments from Bank of England (BoE) Governor Andrew Bailey.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8578, up almost 0.3% from today’s opening rate.
Pound (GBP) Bolstered as Bailey Comments Fuel Rate Hike Expectations
The Pound (GBP) if off to a solid start against the Australian Dollar (AUD) and the majority of its other peers this week, following some hawkish comments from the BoE’s Andrew Bailey on Sunday.
Speaking at an online panel discussion organised by the Group of 30 consultative group on Sunday, Bailey said that whilst the BoE maintains its stance that the recent spike in inflation will be transitory, it now believes that it will accelerate more than previously expected, and the bank is likely to need to act to control it.
Bailey, said:
‘Monetary policy cannot solve supply-side problems – but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations.
And that’s why we at the Bank of England have signalled, and this is another such signal, that we will have to act.’
Some GBP investors have already begun to price in the possibility of the BoE hiking interest rates by the end of 2021, and Bailey’s comments will no doubt fuel more speculation and could help to underpin the Pound this week.
Australian Dollar (AUD) Undermined by Underwhelming Chinese GDP Print
At the same time, the Australian Dollar (AUD) opens today’s session on the defensive, amidst a weakening of market risk appetite.
This comes in response to the publication of China’s latest GDP figures, as growth in the world’s second largest economy slowed more than expected in the third quarter, falling from a downwardly revised 1.2% to 0.2%, against forecasts for a 0.5% expansion.
In addition to souring market sentiment amidst fears over the knock-on impact on the global economic recovery, Australia’s close trading relationship with China sees the ‘Aussie’ hit particularly impacted by the data.
Pound Australian Dollar Forecast: Strong UK Inflation to Extend Sterling’s Gains?
Looking ahead, a key catalyst of movement in the Pound Australian Dollar (GBP/AUD) exchange rate this week will be the UK’s upcoming consumer price index (CPI).
This could send Sterling sharply higher if inflation overshoots expectations again in September, as this would not doubt bolster the case for the BoE to start hiking interest rates in the near-term.
In the meantime, the publication of the minutes from the Reserve Bank of Australia’s (RBA) October policy meeting may provide some fresh direction to the ‘Aussie’ later tonight.
The RBA struck a cautiously optimistic tone in its latest policy statement earlier this month, will this be reinforced by the minutes and help to propel the Australian Dollar higher?