Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound amid BoE Rate Hike Bet Adjustments
The Pound Australian Dollar (GBP/AUD) exchange rate is trading sideways this morning, as GBP investors readjust their expectations for further rate hikes.
At the time of writing, GBP/AUD is trading around AU$1.7419, showing little movement from the morning’s opening rates.
Pound (GBP) Rangebound as Investors Adjust Rate Hike Bets
The Pound (GBP) is seeing a quiet morning of trade today, as investors continue to digest yesterday’s CPI data.
January’s data pointed to a sharp cooldown in inflation, which prompted GBP investors to shift away from Sterling. Furthermore, while a 25bps hike is expected in march, analysts are now expecting the Bank of England (BoE) to consider a pause.
James Smith, Developed Markets Economist at ING, stated:
‘We are still pencilling in a 25bp hike next month for the time being – and the Bank’s own Decision Maker Survey in early March is the next big data point to watch. But if this trend in services inflation persists, then it would be a strong argument in favour of pausing in May.’
Cushioning Sterling this morning could be a persistent shift to bullish trade. Markets appear to be in an upbeat mood today, which is allowing the increasingly risk-sensitive Pound to stay afloat.
Australian Dollar (AUD) Capped by Surprise Unemployment Uptick
The Australian Dollar (AUD) is enduring mixed trade this morning, as investors analyse the latest unemployment data.
January’s unemployment rate unexpectedly climbed to 3.7%, prompting concerns over the Australian labour market. As the Reserve Bank of Australia (RBA) has persistently hiked interest rates, analysts believe this is a sign of the hikes cooling the economy.
David Banasse, an Economist at BetaShares, stated:
‘[The economy] may be beginning to finally buckle under the weight of interest rate increases. As such, it suggests the RBA may not need to raise rates too aggressively in coming months.’
With this in mind, AUD is seemingly unable to capitalise on a risk-on market mood. However, a further hike is widely expected, which may be cushioning the ‘Aussie’.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Retail Sales to Weaken Sterling?
Looking ahead for the Pound, tomorrow’s retail sales data for January is due to print. This is likely to be the core driver of movement for GBP, and is forecast to improve to -0.3%. While sales are higher than the previous month, the decline may dent the Pound.
This evening, Bank of England Chief Economist Huw Pill is scheduled to deliver a speech. If he strikes a hawkish attitude towards inflation, GBP could rise. However, with yesterday’s CPI data he may be more considerate towards a dovish approach.
For the Australian Dollar, Reserve Bank of Australia Governor Phillip Lowe is scheduled to speak tonight. If he reiterates the RBA’s desire to curb inflation and point towards further rate hikes, the ‘Aussie’ could climb.