Pound Australian Dollar (GBP/AUD) Exchange Rate Trades Narrowly amid Fears of BoE-Driven Recession
(Updated 16:37 23/03/23)
The Pound Australian Dollar (GBP/AUD) fell overnight, but regained lost ground during today’s European session. The pairing found support from a evidence of a hawkish split in the Bank of England’s (BoE) Monetary Policy Committee (MPC).
The MPC voted 7-2 in favour of hiking interest rates by 25bps today. Markets had been anticipating signs of a slowdown or pause in policy tightening, but the voting split and subsequent comments may have limited some of this speculation.
Fears that the BoE’s policy could lead to further economic harm may have capped GBP/AUD’s gains, however.
Joe Nellis, professor of global economy at Cranfield School of Management, said:
‘Why has the Monetary Policy Committee voted to make matters worse? Households are already facing the biggest fall in their living standards for many decades, and the banking sector is under strain. Further interest rate rises will do more harm than good at this stage.’
At time of writing the GBP/AUD exchange rate is at around AU$1.8333, virtually unchanged from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Trades Narrowly after BoE Interest Rate Meeting
(Updated 13:18 23/03/23)
The Pound Australian Dollar exchange rate is continuing to trade narrowly today. The Bank of England’s widely expected 25bps interest rate hike has had little effect on the pairing.
The exchange rate’s lack of movement may be down to expectations that this month’s BoE rate hike may be its last for some time.
Speaking on the Bank of England’s meeting, ING economists James Smith and Antoine Bouvet said:
‘We think a pause in May is likely. That’s also partly dependent on banking sector stability and like its peers overseas, the BoE will keep reiterating that it has separate tools that are better suited to maintaining financial stability.’
A mixed market mood may also be capping gains for GBP/AUD today.
At time of writing the GBP/AUD exchange rate is at around AU$1.8348, virtually unchanged from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways ahead of BoE Meeting
The Pound Australian Dollar exchange rate is trading in a narrow range today. The pairing is likely subdued ahead of the Bank of England’s (BoE) interest rate decision.
Dovish signals from the US Federal Reserve may be capping gains for GBP/AUD today as it strengthens the Australian Dollar (AUD).
At time of writing the GBP/AUD exchange rate is at around AU$1.8316, virtually unchanged from this morning’s opening figures.
Pound (GBP) Edges Higher as Markets await BoE Decision
The Pound (GBP) is edging higher today ahead of the BoE’s interest rate decision. Sterling has touched its highest level since the start of February, although bets on the currency are largely muted.
The central bank is largely expected to hike rates by 25bps, although analysts are less certain as to the central bank’s approach at future meetings.
Speaking on the BoE’s decision today, Ellie Henderson at Investec said:
‘In an environment where inflation is reaccelerating, the question is whether the MPC will continue to raise interest rates or opt for a wait-and-see approach given the events that have unfolded over the past week or so.’
Sterling may also be boosted by news that the ‘Windsor Framework’ passed through the House of Commons on Wednesday.
Australian Dollar (AUD) Climbs as China Continues Economic Recovery
The Australian Dollar (AUD) is gaining today. The ‘Aussie’ may be finding support from signs that the US Federal Reserve could pause its rate hike schedule in the coming months.
AUD may also be climbing off the back of signs of a strong economic recovery in China. Recent reports have indicated a boom in air travel and airport spending.
Additionally, indications of stability in China’s beleaguered property sector could be bolstering the currency. Property developer Evergrande announced a massive debt restructuring effort in a bid to save the company from collapse.
Finally, AUD may be inspired by a rise in coal prices today. However, a fall in iron ore prices may be capping gains for the Australian Dollar.
GBP/AUD Exchange Rate Forecast: Could Signals of BoE Policy Tightening Weigh on Pound?
Looking to the day ahead, the BoE’s interest rate decision later today is set to be the main driver of movement in the Pound today. A 25bps rate hike has largely been priced in by markets, meaning that the impact is likely to be minimal.
Investors will be looking to the central bank’s forward guidance for trading impetus around Sterling. If the central bank signals an upcoming pause in policy tightening then it could pull GBP lower. A speech from BoE policymaker Catherine Mann could have a similar effect on the Pound later in the day.
Looking to the rest of the week, data for the UK’s private sector on Friday could deepen losses for the Pound if it prints as forecast. Retail sales growth is set to cool to 0.2% in February and remain solidly below pre-pandemic levels.
Additionally, March’s private sector PMIs are expected to ease from their previous reading. The drop in performance could weigh on the Pound if the data prints as forecast.
The latest output data for the country’s private sectors could bolster the Australian Dollar overnight. Whilst March’s PMIs are set to tick lower, the country’s private sectors are set to remain in positive territory.
With no other significant data this week, movement in AUD is likely to be driven any shifts in risk appetite.