(Updated 16:55 04/02/22)
The Pound Australian Dollar (GBP/AUD) exchange rate has contined to rise today amid a dovish outlook from the Reserve Bank of Australia, as well as a risk-off market mood.
At time of writing the GBP/AUD exchange rate is at around $1.9162, which is up around 0.6% from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as Central Banks Diverge on Outlook
The Pound Australian Dollar (GBP/AUD) exchange rate climbed overnight following the Reserve Bank of Australia’s (RBA) dovish forward guidance, and has continued to tick upward since the opening of the European session.
At time of writing the GBP/AUD exchange rate is at around $1.9073, roughly 0.2% up from this morning’s opening figures.
Australian Dollar (AUD) Drops as RBA Sets out Dovish Stance
The Australian Dollar (AUD) has stumbled against its rivals today as the ‘Aussie’ suffers from a risk-off market mood, and a hawkish forward outlook from the Reserve Bank of Australia (RBA).
Adding to the dovish sentiment already surrounding the RBA after they left interest rates unchanged on Tuesday, Governor Philip Lowe argued that the gradual build-up of wages pressure means that the central bank is prepared to hold off on any interest rate hikes in the near future.
The RBA also updated its inflation outlook, as it expects the rate to climb above 3% for the first time since 2010. Analysts are already predicting a rate hike as soon as June, with Lowe leaving the possibility of rate hikes in 2022 on the table. Lowe was clear that the RBA would do whatever was necessary in order to prevent prices for consumers spiking.
Losses for AUD may have been underpinned by still-high iron ore prices as expectations of demand for the commodity following the Beijing Winter Olympics remain high.
Pound (GBP) Boosted by Hawkish BoE Attitude as Bailey Warns of Slower Growth
The Pound has climbed against its riskier competitors today amid a risk-off market mood and a hawkish outlook from the Bank of England (BoE) following the central bank’s decision to raise interest rates on Thursday.
The BoE’s monetary policy committee (MPC) voted 9-0 to raise interest rates, although only 5-4 on the severity of the rise reflecting a diverging outlook on inflation. Bailey warned that the coming months would see slower growth for the UK and the worst squeeze on household incomes for nearly 30 years.
Whilst the central bank was clear in stating how it felt the economic impact of the Covid-19 had severely lessened, it was quick to point out that any further rise in energy prices would make taming inflation difficult.
Chancellor Rishi Sunak’s last-minute announcement of emergency measures to combat the steep rise in energy prices came after energy regulators Ofgen’s announcement that energy prices would rise by 54% in April.
Headwinds for Sterling from UK domestic politics may continue today following the resignation of four of PM Boris Johnson’s advisors on Thursday. The exodus comes in the wake of the ‘partygate’ scandal and accusations of improper conduct from Johnson in the House of Commons.
GBP/AUD Exchange Rate Forecast: Will UK Growth Slow as Bailey Promised?
Looking ahead to next week, the Pound will see a stacked Friday with multiple significant data releases. Fourth quarter GDP growth figures are forecast to dip slightly as the slowdown in growth predicted by Andrew Bailey looks set to materialise, possibly harming confidence in Sterling.
The Pound could also dip further should December’s balance of trade figures print a widening of the deficit as forecast.
For the Australian Dollar, Monday’s final read of December retail sales figures are set to fall drastically as the country continues to battle with high Covid-19 case levels. Along with a forecast fall to January’s business confidence and February’s consumer confidence on Tuesday, the coming week could see the ‘Aussie’ slide.