Pound Australian Dollar (GBP/AUD) Exchange Rate Gains after BoE Policymaker Testimonies
(Updated 16:39 09/02/23)
The Pound Australian Dollar (GBP/AUD) exchange rate firmed of the course of today. The pairing likely continued to benefit from an upbeat market as sticks rose to record highs on the UK’s FTSE 100.
Hints of further interest rate hikes from the Bank of England may have also inspired gains in the exchange rate today. Speaking in front of the UK’s Treasury Committee, BoE Governor Andrew Bailey signaled that the risk of further inflationary shocks to the UK economy remained:
‘I am very uncertain particularly about price-setting and wage-setting in this country. We have got the largest upside skew in our forecasts that we have ever had on inflation.’
Other BoE policymakers were more dovish however, which may have capped gains for GBP/AUD. Silvana Tenreyro, a notably dovish member of the BoE’s Monetary Policy Commitee (MPC), outlined her belief that inflation was set to fall drastically over the coming year. Tenreyro also hinted at the need for interest rate cuts, stating that interest rates are ‘too high right now’.
At time of writing the GBP/AUD exchange rate is at around au$1.7464, which is up roughly 0.3% 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. A return of risk appetite may be preventing the pairing from slipping.
On the other hand, expectations of a slowdown in policy tightening from the Bank of England (BoE) may be weighing on GBP/AUD.
At time of writing the GBP/AUD exchange rate is at around AU$1.402, virtually unchanged from this morning’s opening figures.
Australian Dollar (AUD) Bolstered by China-Based Optimism
The Australian Dollar (AUD) is climbing today. A return of risk appetite may be providing a boost to the ‘Aussie’.
The positive market mood may be fueled by easing US-China tensions in recent days. Additionally, hopes of interest rate cuts from the People’s Bank of China’s (PBOC) could also have added to the optimism surrounding the Chinese economy.
A pullback in market bets on further interest rate hikes from the Federal Reserve may also be contributing to the upbeat mood.
Reports indicating that the first shipment of Australian coal has arrived in China may be providing further support to AUD today. A downturn in commodity prices may be capping gains for the currency, however.
Finally, market bets on further interest rate hikes from the Reserve Bank of Australia (RBA) could be contributing to AUD’s gains today.
Pound (GBP) Climbs Despite Fears of BoE Slowdown
The Pound (GBP) is making gains against its peers today. GBP is trading narrowly against the Australian Dollar, however. A positive market mood could be behind Sterling’s rise.
Fresh record-highs in the FTSE 100 share index may also be adding to the confident market mood today.
Sterling may be seeing its gains capped by bets on a policy slowdown from the Bank of England (BoE), however.
On the other hand, these concerns may be offset by hawkish comments from BoE policymaker Catherine Mann earlier this week. Mann signalled that the central bank would need to continue with interest rate hikes throughout 2023.
GBP/AUD Exchange Rate Forecast: Could UK Dodge Technical Recession and Boost Pound?
Looking to the remainder of the week for Sterling, GDP figures for December are set to indicate a contraction in the UK’s economy. If the data prints as forecast on Friday, it could dent confidence in Sterling and reignite recession fears.
Also on Friday, GDP growth data for the fourth quarter of 2022 could bolster the Pound if it prints as expected. Growth in the fourth quarter of last is expected to stagnate which would mean that the UK avoided a technical recession in 2022. This could bolster optimism in the UK economy and push the Pound higher.
For the Australian Dollar, a statement from the RBA on its forward policy on Friday could push AUD higher. Markets are anticipating a hawkish stance from the central bank following its interest rate decision earlier this week.
The latest Chinese inflation data on Friday could provide a boost to the ‘Aussie’, however. January’s inflation is expected to rise in the world’s second-largest economy. If the figures print as forecast it could belay market fears of deflation.