Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as UK to Bring Forward Debt Cutting Plan
The Pound Australian Dollar (GBP/AUD) exchange rate is on the rise this morning. GBP investors welcoming the news that the government will bring forward the publication of its medium-term fiscal plan.
At the time of writing the GBP/AUD exchange rate was trading at around AU$1.7481. Up roughly 0.3% from the day’s opening levels.
Pound (GBP) Rallies as Kwarteng to Publish his Debt-Cutting Plan This Month
The Pound (GBP) is trending broadly higher this morning, as the UK Government announced it will bring forward Chancellor Kwasi Kwarteng’s planned fiscal statement.
The statement is now expected this month and will be accompanied by forecasts from the Office of Budget Responsibility (OBR). UK Investors reacted favourably to this news, so the Pound saw a recovery against its peers, bringing the GBP/AUD exchange rate pairing back in line with pre-budget levels.
The Pound’s continued recovery is attributed to action from Chancellor Kwarteng, which compounds the previous work done by the Bank of England (BoE) to soothe the UK bond markets.
Broad uncertainty among UK investors about the Government’s fiscal policy is being eased. While yesterday and today’s changes of tact offer little direct impact on fiscal sustainability, they were necessary to ease fears about Government policy in the markets.
Australian Dollar (AUD) Mixed amid Return of Risk Appetite
The Australian Dollar (AUD) is trading narrowly in the morning sessions, seeing the bullish mood muted by a lower-than-expected interest rate hike by the Reserve Bank of Australia (RBA).
The RBA raised interest rates by 25bps, below the expected 50bps hike forecast by AUD investors. This dovish increase was then countered by a more hawkish sentiment from RBA Governor Phillip Lowe who stated:
‘Today’s further increase in interest rates will help achieve a more sustainable balance of demand and supply in the Australian economy. This is necessary to bring inflation back down. The Board expects to increase interest rates further over the period ahead.’
However, this statement had less impact on the market than an improved showing from Asian markets in overnight sessions. A risk-on mood sprouted, allowing the risk-sensitive ‘Aussie’ to gain ground.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Sterling to Extend Gains If Government Continues to Reverse Parts of Budget
Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate may strengthen if the UK government continues to reverse parts of its mini-budget.
Further in the week, Australia’s retail sales data for August is scheduled for release on Wednesday. Markets expect a contraction of 0.6%, which could weigh on the ‘Aussie’.
Thursday’s Australian balance of trade report may bolster AUD, with expansion expected as the country continues to recover from Covid.
With the Pound, Wednesday sees the release of the UK services PMI, with a contraction expected. This may impact GBP, but UK Government fiscal policy is likely to remain the focus.