GBP/AUD Exchange Rate Slides in Bullish Trade
(Updated 09:20 23/2/2022) The Pound Australian Dollar (GBP/AUD) exchange rate is under pressure this morning. The pairing retreating from a one-month high as a bullish market mood disproportionately benefits the ‘Aussie’.
The upbeat mood appears linked to hopes China’s reopening narrows the chances of a global recession this year.
However ongoing risks posed by heightened geopolitical tensions are likely to effectively cap the Australian Dollar and may see the currency give ground later in the session.
Meanwhile GBP investors will be focused this morning on an upcoming speech from Bank of England (BoE) policymaker Catherine Mann. As one of the BoE’s more hawkish members she has the potential to send the Pound higher.
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Pound Australian Dollar Exchange Rate Extends Bullish Run
The Pound Australian Dollar (GBP/AUD) exchange rate is trading at a one-month high this morning. The pairing firming on the back of disappointing Australian wage figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7719. Up roughly 0.4% from today’s opening rate.
Australian Dollar (AUD) Slumps on Weaker-than-Expected Wage Price Index
The Australian Dollar (AUD) remains offered this morning, after slumping overnight in the Asian trading session.
This plunge in AUD exchange rates was linked to the publication of Australia’s latest wage price index. Wage growth in the private sector slowed from 1.1% to 0.8% in the fourth quarter, missing forecasts for a 1% increase.
The softer-than-expected wage figures indicate domestic inflation may not be as sticky as previously thought. This, in turn, is weakening expectations for future interest rate hikes from the Reserve Bank of Australia (RBA) and weighing on the ‘Aussie’.
Also exerting pressure on the Australian Dollar this morning is a broadly bearish market mood. A ratchetting up of geopolitical tensions in the past couple of weeks is making the risk-sensitive ‘Aussie’ less appealing to investors.
The latest setback for global risk assets like AUD comes amid concerns over Russia’s next moves in Ukraine. As we approach the first anniversary of Vladimir Putin’s invasion.
Pound (GBP) Sustains Gains on BoE Rate Hike Bets
After surging on Tuesday, the Pound (GBP) looks to consolidate its gains against the Australian Dollar this morning.
Helping Sterling to consolidate its position are bets for additional interest rate hikes from the Bank of England (BoE).
GBP investors have renewed confidence in the BoE following the publication of the UK’s latest PMIs on Tuesday. A surprise rebound in service sector growth this month is seen as giving the BoE a little more room to manoeuvre with future hikes.
Analyst now see BoE interest rates peaking at 4.55%. The 15bps increase since Monday now suggests the bank may deploy two more interest rate hikes before pausing its tightening cycle.
Pound Australian Dollar Forecast: Hawkish BoE Speeches to Reaffirm GBP Strength?
Looking ahead to the second half of the week, the prospect of some more hawkish rhetoric from BoE policymakers could propel the Pound Australian Dollar (GBP/AUD) exchange rate to new highs.
A speech by Catherine Mann – one of the BoE’s more hawkish members – has the potential to propel the GBP/AUD exchange rate sharply higher if she maintains that the bank needs to continue to act forcefully to tame inflation.
In the meantime, the Australian Dollar could face an uphill battle overnight. Heightened geopolitical tensions are likely to ensure a risk-off impulse remains firmly in place.