Pound Australian Dollar (GBP/AUD) Exchange Rate Regains Lost Ground amid BoE Rate Hike Bets
(Updated 16:47 23/02/23)
The Pound Australian Dollar (GBP/AUD) exchange rate regained some lost ground to trade within a narrow range today. The pairing may have found support from bets on further interest rate hikes from the Bank of England (BoE).
A pullback in risk appetite may have also prompted GBP/AUD to regain some lost ground today. On the other hand, ongoing Brexit-related headwinds may have capped gains for the pair.
At time of writing the GBP/AUD exchange rate is at around AU$1.7703, which is virtually unchanged from this morning’s opening figures.
The original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Slips amid Upbeat Market Mood
The Pound Australian Dollar (GBP/AUD) exchange rate is sliding today. A risk-on mood may be weighing on the pairing.
Bets on further action from the Reserve Bank of Australia (RBA) may also be pulling GBP/AUD lower. On the other hand, the exchange rate may be finding support from hawkish Bank of England (BoE) rhetoric.
At time of writing the GBP/AUD exchange rate is at around AU$1.7644, which is down roughly 0.2% from this morning’s opening figures.
Pound (GBP) Drops as Brexit Struggles add to Poor UK Outlook
The Pound (GBP) is slipping today despite a risk-on mood in the markets. Sterling may be coming under pressure from concerns regarding UK-EU negotiations over the Northern Ireland Protocol.
Despite signals earlier this week that a deal may imminent, reports indicate that the two parties remain in ‘intensive talks’. UK Prime Minister Rishi Sunak has come under pressure from MPs in the DUP and his own party regarding the UK’s post-Brexit negotiating position.
Brexit may also be generating additional headwinds for the Pound today. Former Sainsbury’s CEO Justin King warned that widespread vegetable shortages were likely a result of Brexit.
On the other hand, GBP could be underpinned by rising BoE rate hike bets. Speaking today at the Resolution Foundation, policymaker Catherine Mann signalled that further hikes may be coming:
‘Failing to do enough on rates now risks the worst of both worlds – higher inflation and lower activity.’
Australian Dollar (AUD) Climbs as Markets Price in Further RBA Hikes
The Australian Dollar (AUD) is climbing today. The ‘Aussie’ may be finding support from a return of global risk appetite.
AUD may also be seeing a boost from bets on further interest rate hikes from the RBA. Following hawkish meeting minutes earlier this week, markets are pricing in a minimum 25bps rate hike at the RBA’s next meeting.
Wage growth data on Wednesday may be prompting traders to pare back some of their bets, however.
AMP Capital senior economist Diana Mousina said:
‘There are now signs that the labour market is at a turning point, with jobs growth negative over December/January and forward-looking indicators of employment pointing to softer jobs growth in coming months.’
The Australian Dollar could also be bolstered today by reports that China’s Covid-19 wave is close to an end. Chinese health authorities signalled that the country’s epidemic had ‘basically ended’.
GBP/AUD Exchange Rate Forecast: Will Dovish BoE Signals Pull Pound Lower?
Looking ahead to the rest of the week for the Pound, distributive trades figures from the Confederation of British Industry (CBI) could weigh on GBP later today. The data is forecast to point to a further downturn in the UK’s retail sector.
On Friday, an expected further downturn in February’s consumer confidence could keep pressure on Sterling. A speech from BoE policymaker Silvana Tenreyro could add to any negative sentiment surrounding the Pound. Tenreyro is one of the central bank’s more dovish board members and could hint a policy tightening slowdown.
The prospect of ongoing industrial action could generate headwinds for the Pound this week. Additionally, any further developments in UK-EU negotiations concerning the NI Protocol could also prompt movement in Sterling.
The Australian Dollar will see no further significant data this week. The risk-sensitive ‘Aussie’ may be affected by any changes in market mood.
The prospect of further interest rate hikes from the RBA could lend support to AUD over the rest f the week.