Pound Australian Dollar Exchange Rate Firms on RBA Lowe Comments
The Pound Australian Dollar (GBP/AUD) exchange rate is ticking lower this morning, following comments from Reserve Bank of Australia (RBA) Governor Philip Lowe.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7961, down roughly 0.3% from today’s opening rate.
Australian Dollar (AUD) Firms RBA’s Lowe Suggests 2022 Rate Hike is ‘Plausible’
The Australian Dollar (AUD) is trending higher against the Pound (GBP) and the majority of its other peers this morning. The uptick in the ‘Aussie’ comes on the back of renewed hopes that the RBA might begin raising interest rates in 2022.
In a speech to an Australian Financial Review summit RBA Governor Philip Lowe struck a cautiously optimistic tone. Lowe suggested Australia’s economy is fairly well positioned to ride out any shocks stemming from the war in Ukraine.
While Lowe sought to temper market rate hike expectations, AUD investors nonetheless seized on his suggestion that it is ‘plausible’ interest rates could be raised this year.
‘The recent lift in inflation has brought us closer to the point where inflation is sustainably in the target range [of 2% to 3%]. It is plausible that the cash rate will be increased later this year.’
Reinforcing the upside in the Australian Dollar this morning is recent surge in commodity prices. Which continued to rally overnight in response to reports Russia will move to restrict some raw material exports in the coming days.
It’s unclear which materials will be targeted, but the threat of supply restrictions have seen prices of key Australian exports such as iron ore soar over the past couple of weeks.
Pound (GBP) Losses Capped by Ukraine Optimism
Meanwhile, the Pound’s losses against the Australian Dollar look to be tempered by easing concerns over the war in Ukraine.
This follows reports that Ukraine is no long insisting on NATO membership in a key concession to Russia ahead of peace talks between the Russian and Ukrainian foreign ministers in Turkey on Thursday.
Any chance for a de-escalation of the conflict in Eastern Europe will come as a relief to GBP investors, who are concerned about the wider economic impact the war could have on the UK.
Pound Australian Dollar Forecast: Rebound in UK GDP to Bolster Sterling?
Looking ahead to the second half of the week, the Pound Australian Dollar (GBP/AUD) exchange rate may draw some support from the publication of the UK’s latest GDP figures.
January’s monthly release is expected to show growth rebounded from -0.2% to 0.2% as the lifting of Covid restrictions in England allowed more of the economy to open up.
However any gains may be tempered by the accompanying three-month average print, as this is forecast to show a modest slowing of growth in the three months to January.
Meanwhile, the Australian Dollar may look to consolidate its recent gains, so long as commodity prices remain elevated.