Pound Australian Dollar (GBP/AUD) Exchange Rate Ticks Higher amid Hawkish BoE Rhetoric

Pound Australian Dollar (GBP/AUD) Exchange Rate Firms as BoE’s Mann Argues for Further Rate Hikes

(Updated 16:38 24/11/22)

The Pound Australian Dollar (GBP/AUD) exchange rate remained in positive territory today. A persistent risk-on mood kept any drastic gains for the currency pair limited, however.

Additional hawkish comments from Boe policymakers kept the exchange are ticking higher, however. The comments from policymaker Catherine Mann pontentially offset the earlier cautious stance from Deputy Governor Dave Ramsden.

Speaking on Thursday, Mann said:

‘The BOE has communicated effectively that rates need to rise and that market expectations before the November meeting were too high.’

The confirmation that markets have been pricing in too drastic a rate hike may have limited the pair’s gains.

At time of writing the GBP/AUD exchange rate is at around AU$1.7928, which is up roughly 0.2% from this morning’s opening figures.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Gains as BoE Policymakers Hint at Further Hikes

The Pound Australian Dollar (GBP/AUD) exchange rate is edging higher today. A risk-on trading sentiment may be limiting gains for the currency pair. A poor outlook for the UK economy could also be denting confidence in the pair

On the other hand, GBP/AUD could be finding support from Bank of England (BoE) rate hike bets and China’s Covid-19 surge.

At time of writing the GBP/AUD exchange rate forecast is at around AU$1.7933, which is up roughly 0.2% from this morning’s opening figures.

Pound (GBP) Firms amid Hawkish BoE Comments

The Pound (GBP) is ticking higher against many of its rivals today. Sterling is potentially being underpinned by hawkish comments Bank of England (BoE) chief economist Huw Pill.

A recent survey of economists conducted by Reuters found 75% of respondents forecasting a 50bps rate hike from the BoE.

Markets are betting on currently betting on further interest rate hikes from the central bank amid high inflation and a tight labour market.

Speaking on Wednesday evening, Pill said:

‘Given the need to contain the risk of greater inflation persistence implied by potential second round effects, further action is likely to be required to ensure inflation will return sustainably to its 2% target over the medium term.’

Comments from the BoE policymaker Dave Ramsden today could also be supporting GBP. Ramsden signalled that ‘my bias is towards further tightening’.

The Pound’s upward movement is potentially being stifled by the UK’s poor outlook, however. November’s PMIs released on Wednesday indicated that the UK had already fallen into a recession.

Australian Dollar (AUD) Subdued as China’s Covid Surge Continues

The Australian Dollar (AUD) is seeing subdued trading today. The ‘Aussie’ is seeing losses limited by a risk-on market mood and an uptick in iron ore prices.

Speculation that the Reserve Bank of Australia could return to a more aggressive rate hike schedule may also be lending support to AUD.

A continued surge in Covid-19 cases in China is likely capping gains for AUD today. This week has seen further restrictions introduced across the country in a bid to contain fresh flare-ups.

In Beijing, shopping malls and parks and have been shut with authorities instructing individuals to remain at home.

Recent reports also indicated unrest at the country’s largest iPhone factory in Zhengzhou city. Markets remain fearful of a slowdown in the world’s second-largest economy.

GBP/AUD Exchange Rate Forecast: Will BoE’s Mann Add to BoE Rate Hike Bets?

Looking to the remainder of the week for the Pound, November’s industrial trends orders could pull the currency lower later today. The data could also add to the poor outlook for the UK’s private sectors.

On the other hand, a speech from BoE board member Catherine Mann could help underpin Sterling. Investors will be looking for any signals regarding the central bank’s forward path.

With no significant data left for the Australian Dollar this week, movement in the currency is likely to be driven by any shifts in risk appetite.

Further surges in China’s Covid-19 case levels and reports of unrest could weigh on AUD, however.

Gareth Monk

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