Pound Australian Dollar (GBP/AUD) Exchange Rate Rises after Dovish RBA Comments
(Updated 16:42 01/11/22
The Pound Australian Dollar (GBP/AUD) exchange rate climbed higher of the course of the day despite a persistent risk-on mood. The dovish comments from Reserve Bank of Australia (RBA) Philip Lowe weighed on the Australian Dollar (AUD), pushing the currency pair higher.
Whilst Lowe stated that the RBA’s board would monitor upcoming data for clearer policy direction, he signaled that in the near-future the central bank would be slowing its pace of interest rate hikes.
On the other hand, gains for the GBP/AUD were likely capped by downbeat data from the UK’s manufacturing sector. The sector saw its biggest contraction since May 2020 in September amid lower demand, soaring energy costs, and high inflation.
At time of writing the GBP/AUD exchange rate was at around AU$1.7930, which is up roughly 0.2% from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways amid Risk-On Mood
The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. The currency pair’s movement is likely being kept in a narrow range by a risk-on mood. A dovish rate hike from the Reserve Bank of Australia (RBA) may be preventing drastic losses, however.
At time of writing the GBP/AUD exchange rate is at around AU$1.7904, virtually unchanged from this morning’s opening figures.
Australian Dollar (AUD) Ticks Higher as RBA Hikes Rates by 0.25%
The Australian Dollar (AUD) is firming today despite the RBA’s dovish interest rate decision overnight.
The RBA rose rates by 0.25% as forecast today. Governor Philip Lowe stated that the move was necessary as ‘inflation in Australia is too high’. Lowe went on to say that not continuing with rate hikes would lead to the ‘evil of inflation’ becoming entrenched. This may be prompting some bets on more aggressive moves from the RBA today.
Expectations for future rate hikes from the central bank are largely downbeat, however. Robert Carnell, Regional Head of Asia-Pacific Research at ING, said:
‘It looks more probable now that the RBA will simply stick to a 25bp rate increase pace until it believes it has taken rates high enough.’
On the other hand, a better-than-expected printing of Chinese factory activity in October may be limiting losses for AUD today.
Pound (GBP) Bolstered by BoE Rate Hike Bets
The Pound (GBP) is firming against many of its rivals today despite a return of global risk appetite. Market repositioning ahead of the Bank of England’s interest rate decision on Wednesday may be bolstering Sterling.
The BoE is largely expected to push ahead with its forecast bumper 0.75% rate hike this week, with bets on the move potentially push GBP higher today.
Continued confidence in UK Prime Minister Rishi Sunak’s fiscal competency may also be supporting GBP today. Reports have indicated that Sunak is planning a drastic path of spending cuts and tax rises.
The Pound’s gains could be capped by the possibility of a below-forecast hike of 0.5%, however. Analysts at ING are narrowly predicting such a move from the BoE this week with a 50/50 split amongst members of the Monetary Policy Committee (MPC).
GBP/AUD Exchange Rate Forecast: Will BoE Hike Rates In-Line with Forecasts?
Looking ahead for the Pound, the BoE’s interest rate decision on Thursday will be the focus for Sterling investors this week. Markets have largely priced in the forecast 0.75% rate hike so the impact of the decision on GBP could be muted.
On the other hand, if the central bank pushes ahead with a below-forecast hike then it could see the Pound tumble. A dovish pivot from the BoE in their forward guidance could have a similar effect on the currency.
Thursday and Friday’s final readings of October’s private sector output could also add to any negative sentiment around GBP. Performance is expected to slump across all sectors.
For the Australian Dollar, Wednesday’s final reading of October’s services sector output could weigh on the ‘Aussie’. The figures are expected to confirm a contraction in the sector.
A forecast widening in the country’s trade surplus on Thursday could help cushion losses for AUD if figures print as expected.
Finally on Friday, the RBA’s statement on monetary policy could also cause movement in AUD. Given the central bank’s mixed stance following its decision, investors will be keenly looking for any signals of the RBA’s forward policy.