(Updated 16:55 11/03/22)
The Pound Australian Dollar (GBP/AUD) continued to climb today. Strong UK data has kept the Pound (GBP) boosted throughout the day’s trading. A continued fall in iron ore prices potentially limited gains for the Australian Dollar (AUD).
At time of writing the GBP/AUD exchange rate is at around $1.7879, which is up roughly 0.5% from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Boosted as UK GDP Grows
The Pound Australian Dollar (GBP/AUD) exchange rate is climbing higher today. Above forecast UK GDP figures for January are helping to bolster the Pound (GBP). Further escalations in the Russia-Ukraine conflict have seen a retreat to global risk appetite.
At time of writing the GBP/AUD exchange rate is at around $1.7864, roughly 0.4% up from this morning’s opening figures.
Pound (GBP) Gains after Above-Forecast GDP Figures
The Pound (GBP) is rising against many of its rivals today. A better than expected recovery to the UK’s economy in January is helping to boost Sterling.
Figures on Friday from the Office for National Statistics (ONS) showed that gross domestic product grew by 0.8% in January. This was above forecasts of 0.2% and represented the strongest monthly expansion since June. The growth came after a -0.2% fall in December amid the Omicron wave.
Whilst the growth may continue in February, analysts warned that soaring inflation and the war in Ukraine is likely to harm the UK’s further economic recovery.
Paul Dales of Capital Economics said:
‘Given that Omicron cases were still very high in the first half of January, some of the rebound in activity may have flowed into February too. But the hit to households’ real disposable incomes due to surging energy prices, partly due to the war in Ukraine, and higher taxes will start to be felt from March and April.’
The strong figures are expected to increase calls for the Bank of England (BoE) to raise interest rates at their next meeting. Markets have largely priced in a hike from the BoE.
Australian Dollar (AUD) Drops as Russia Forces Encircle Kyiv
The Australian Dollar (AUD) is falling against its competitors today. A risk-off trading mood has weighed upon the ‘Aussie’ as the war in Ukraine continues to escalate.
Reports on Friday indicate that Russian forces are preparing to encircle the Ukrainian capital of Kyiv. Fresh attacks on the previously safe cities of Dnipro and Lutsk likely further undermined risk appetite today. Ukrainian ministers are hoping to be able to open further humanitarian corridors in order to aid civilian evacuations from besieged cities.
A retreat to iron ore prices is also likely pulling AUD down today. Prices of the commodity have dropped by around 2.6% today as commodity pulled back from their previous rally.
GBP/AUD Exchange Rate Forecast: Will BoE Commit to Larger Rate Hike?
Looking to next week for the Pound, January’s unemployment rate is expected to remain largely unchanged on Tuesday. This could further increase calls for a rate hike from the BoE ahead of their meeting and bolster Sterling.
GBP investors will most keenly be watching the BoE’s interest rate decision on Thursday. A larger than expected rate hike could shock investors however and see the Pound leap.
For the Australian Dollar, minutes for the Reserve Bank of Australia’s (RBA) latest meeting on Tuesday could prompt some upward movement for AUD. The RBA has previously been dovish in regards to interest rate hikes but any hints of a 2022 rate hike could push the ‘Aussie’ higher.
On Thursday, Australia’s unemployment rate for February is predicted to remain close to January’s figure. AUD could trend higher should these figures print as forecast and increase calls for a rate hike from the RBA. Additionally, the RBA’s bulletin could prompt movement in AUD should investors pick up on any relevant forward guidance.