(Updated 16:57 02/11/2021)
The Pound Australian Dollar (GBP/AUD) exchange rate has continued to rise today as the Australian Dollar (AUD) continues to fall against its rivals. As of time of writing the GBP/AUD exchange rate is around $1.8325, which is close to 1% up from this morning’s opening.
The Reserve Bank of Australia’s (RBA) decision to leave interest rates unchanged at 0.1% and to end its yield curve control policy has caused short-term confidence in the ‘Aussie’ to plummet. A sharp drop in Chinese iron ore prices has also had a negative effect on AUD as demand for one of Australia’s key exports falls.
The Pound (GBP) has dipped slightly this afternoon but remains the steadier half of the currency pair. Sterling’s movements have likely been influenced by the continuing row over fishing rights between the UK and France, and ongoing negotiations over the Northern Ireland protocol.
Pound Australian Dollar (GBP/AUD) Exchange Rate Boosted by RBA Interest Rate Decision
The GBP/AUD exchange rate has leapt by around 0.7% today as the Australian Dollar (AUS) falls after the Reserve Bank of Australia’s (RBA) decision to keep interest rates at a record low of 0.1%.
As of time of writing, the GBP/AUD exchange has stabilised at around $1.8275.
Australian Dollar (AUD) Falls on RBA Rate Stance
The Australian Dollar (AUD) has tumbled today following the RBA’s interest rate decision, despite Governor Phillip Lowe stating that the country’s economy is bouncing back as COVID-19 restrictions are lifted across Australia.
The RBA announced that it would be keeping interest rates at 0.1% until 2023 at the earliest, despite fears that rising energy costs and further supply bottlenecks this winter could increase inflationary pressure.
In the days prior to the RBA’s announcement, the Australian Dollar had climbed as investors had bet on an interest rate hike from the central bank, but the dovish stance of the RBA may explain why the Australian Dollar has fallen so drastically today. Reluctance to enact any rate changes earlier than planned may also harm the appeal of the Australian Dollar (AUD) moving forward as other central banks announce their own policy changes in the coming weeks.
The focus for the RBA is now on whether wage and GDP growth will be substantial enough to combat inflation and support Australian economic growth
Pound (GBP) Falters amid Brexit Disputes
The Pound (GBP) has faced market headwinds this week as fishing rights and Brexit tensions continue to affect the currency’s movements and dominate headlines.
The row between the UK and France over fishing rights has continued to escalate, and experts have warned that it threatens to derail talks at this week’s COP26 conference. Leading scientists and environmentalists have called on both countries to declare an immediate ceasefire so that discussions at COP26 regarding global temperature rises can take place productively.
President Macron may well have taken this to heart, as France this morning withdrew threats to slow UK exports and ban UK fishers from French coasts.
There are also reports of violence in Northern Ireland as talks between the UK and the EU over the Northern Ireland protocol continue. It is likely negotiations over both issues will continue to have an effect on the Pound and may create fresh uncertainty in the markets.
Pound Australian Dollar Forecast
Looking forward to the rest of the week, the finalised data for Australia’s services PMI is due today. Forecasts indicate a return to expansion in October which may limit further losses to AUD.
Investors looking to the ‘Aussie’ will also be keeping an eye on the country’s September Balance of Trade data. The export rich country saw a record surplus in August but is expected to fall from $15.1bn to $12.2bn, which may prompt further downward movement in the Australian Dollar .
The UK will see its finalised services PMI data for October this week. Forecasts indicate an expansion and increased output, which may provide a fresh boost to Sterling.
The most significant data release for the UK this week will be the Bank of England’s (BoE) interest rate decision on Thursday. It’s expected that a rate hike will be unlikely so the focus for investors will be on the BoE’s guidance moving forward. An announcement of future rate hikes by the BoE could see the Pound rise, but if no further information is given on rate changes before Christmas then the Poound (GBP) may falter.