Pound Australian Dollar (GBP/AUD) Climbs as Markets Brace for 50bps Hike
The Pound Australian Dollar (GBP/AUD) exchange rate is gathering strength this morning ahead of the Bank of England’s (BoE) interest rate decision.
At time of writing, the GBP/AUD exchange rate is around $1.8155, a 0.25% climb from this morning’s opening levels.
Pound (GBP) Rallies ahead of Interest Rate Decision
The Pound (GBP) is buoyant against riskier currencies but is flagging against most of its other peers. Expectations of a 50bps rate hike from the BoE are all but priced in, but with an expected split vote, the decision will be far from unanimous.
Without a proceeding press conference from BoE Governor Andrew Bailey, the vote split between the policymakers will be scrutinized. With inflation remaining near 40-year highs at 10.7%, headline CPI still sits far above the central bank’s target rate of 2%. Further rate hikes are expected, which could keep Sterling buoyed, but a return to a more conservative stance is expected.
With last month’s 7-2 split for a 75bps rate hike, another split vote could spell uncertainty for the central bank, and investors. Deepening division within the ranks of the policymakers could mean volatility. Michael Hewson, Chief Market Analyst at CMC Markets, warns that the MPC could be split again today:
‘The weak economic outlook will play a part in today’s decision with the real possibility of a three-way split on policy, which will make the prospect of a clear message much more difficult.’
Australian Dollar (AUD) Sinks Despite Upbeat Jobs Data
The Australian Dollar (AUD) is failing to capitalise on upbeat labour market data today. A flurry of downbeat data from China is weighing heavily on the risk-sensitive currency.
The Australian Bureau of Statistics released a myriad of jobs data that showed the unemployment rate stayed unchanged at 3.4%. Meanwhile, an unexpected jump in employment of 64,000 lent further support, against a predicted 19,000.
However, dismal economic data from China soured the risk sentiment and dragged the ‘Aussie’ down. Retail sales contracted far worse than expected as sales fell 5.9% YoY compared to an expected 3.7% drop. Despite a seventh consecutive month of expansion, industrial production missed estimates and pointed to the weakest growth since May.
Pound Australian Dollar Exchange Rate Forecast: BoE Interest Rate Decision to Sink Sterling?
Looking ahead, the Pound Australian Dollar exchange rate could see further fluctuations with the release of the BoE rate decision. With a 50bps rate hike priced in, a deviation is likely to spur movement.
Elsewhere, Friday sees the release of UK retail sales, and a forecasted fall could weigh more on the UK economy, and the Pound.
Meanwhile, the ‘Aussie’ will be left to trade on market sentiment amid a lack of data. With a risk-averse market, the Australian Dollar could be left exposed to further downward pressures.