Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as Confidence Returns in European Markets
(Updated 16:40 21/03/23)
The Pound Australian Dollar (GBP/AUD) exchange rate continued to trade in positive territory today. The pairing may be finding support from signs of stability in the European banking sector. This renewed confidence could be prompting the Pound (GBP) to make gain against its riskier peers like the Australian Dollar (AUD).
Gains for GBP/AUD are potentially being capped by bets on an end to the Bank of England’s (BoE) policy tightening cycle. Markets are now pricing in a roughly 44% chance that the BoE will hold interest rates steady at its meeting later this week.
At time of writing the GBP/AUD exchange rate is at around AU$1.8312, which is up roughly 0.2% from this morning’s opening figures.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Bolstered by Risk-Off Mood
The Pound Australian Dollar exchange rate is climbing today. The pairing may be finding support from a cautious market mood.
Dovish minutes from the Reserve Bank of Australia (RBA) may also be prompting gains in the exchange rate.
At time of writing the GBP/AUD exchange rate is at around AU$1.8338, which is up roughly 0.4% from this morning’s opening figures.
Australian Dollar (AUD) Falls as RBA Minutes Hint at Rate Hike Pause
The risk-sensitive Australian Dollar is falling today. The ‘Aussie’ may be seeing losses following the release of the latest Reserve Bank of Australia (RBA) meeting minutes.
The minutes maintained a cautious tone and hinted at a possible pause in policy tightening in the coming months. The minutes did also indicate the central bank would consider further hikes should inflation remain high.
Commonwealth Bank’s head of Australian economics, Gareth Aird, said:
‘At this stage, it looks like a coin toss as to whether the RBA leaves the policy rate on hold in April.
A sharp downturn in iron ore prices could also be pulling AUD lower today. The fall comes as Chinese authorities announced a renewed crackdown on rampant price speculation.
Pound (GBP) Mixed as Government Borrowing Climbs, Gains Against AUD
The Pound is seeing mixed movements today. A cautious market mood may be bolstering Sterling against its riskier rival. GBP is seeing losses elsewhere, however.
A lack of data may be leaving Sterling vulnerable to any shifts in market mood. The Pound may also be seeing subdued bets ahead of key data and the BoE’s interest rate decision later this week.
Bets on a 25bps rate hike from the central bank this week may be lending support to GBP today, although the central bank’s path remains unclear.
James Smith, Antoine Bouvet, and Francesco Pesole of ING said:
‘A calmer financial market backdrop would keep a 25bp hike on the table. Further volatility could easily see a ‘no change’ decision.’
Sterling may be coming under pressure from the latest government borrowing figures today. February’s borrowing rose to its highest record for the month on record.
GBP/AUD Exchange Rate Forecast: Will Hints of BoE Slowdown Weigh on GBP?
Looking to the week ahead for the Pound, the BoE’s interest rate decision on Thursday will likely be the most anticipated data releases for Sterling this week. The forecast 25bps rate hike from the central bank has been largely priced in by markets, meaning the impact of the decision could be minimal.
Investors will instead be looking to the BoE’s forward guidance alongside the decision. Signals of an imminent pause in policy tightening could pull Sterling lower.
Ahead of the decision, cooler CPI figures on Wednesday could add expectations a slowdown in rate hikes from the BoE. February’s headline and core inflation are expected to tick lower which could weigh on GBP.
Data for the UK’s private sectors on Friday could have a mixed effect on the Pound if it prints as forecast. On the one hand, February’s retail sales are expected to rise by only 0.2%. This is down from January’s 0.5% increase.
On the other, the latest UK services sector PMI could limit any downturn for Sterling. The index is expected to remain in positive territory.
Private sector PMIs are set to be the key driver for the Australian Dollar (AUD) over the rest of the week. March’s manufacturing and services sector PMIs are forecast to remain close to last month’s positive readings. The data could bolster the ‘Aussie’.