Pound Australian Dollar (GBP/AUD) Exchange Rate Stays Elevated as GBP Investors Bank on Further Tightening
(Article updated 16:18, 19/4/23) The Pound Australian Dollar (GBP/AUD) exchange rate is remaining elevated this afternoon, as investors begin to anticipate further rate hikes from the Bank of England (BoE).
With investors and economists now seeing a rate hike in May as all but confirmed, a rate hike in June is being entertained. As such, the Pound’s gains are being underlined as we come to the end of the European session.
However, elevated Federal Reserve rate hike bets are serving to keep the market mood downbeat. As such, Sterling’s gains are likely being capped as investors consider safer options than the increasingly risk-sensitive Pound.
Yet, this downbeat mood is keeping the Australian Dollar firmly grounded. At the time of writing, GBP/AUD is trading at around AU$1.8511, a rise of roughly 0.4% from the morning’s opening rates.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Soars as UK Inflation Remains in Double Digits
The Pound Australian Dollar exchange rate is climbing this morning, following the latest set of UK inflation data.
At the time of writing, GBP/AUD is trading at around AU$1.8563, a rise of roughly 0.6% from the morning’s opening rates.
Pound (GBP) Roars Higher on Double Digit Inflation Print
The Pound (GBP) is soaring this morning, following the release of the latest UK consumer price index data for March. Headline inflation cooled to 10.1%, remaining over five times the Bank of England’s (BoE) target rate.
Similarly, core inflation stuck at 6.2% over the months. Because of this, in conjunction with yesterday’s wage data, the BoE is expected to hike rates during their May meeting.
Currently, markets expect this to be a 25bps hike but a growing consensus that further tightening may follow is emerging.
Professor Costas Milas, of the Management School at University of Liverpool, commented:
‘Inflation is therefore proving (much) more stubborn than what the Bank expects. So it makes sense to expect that the Bank’s Monetary Policy Committee (MPC) will raise interest rates further to 4.5% on 11th May. In fact, UK interest rates could potentially rise up to 4.75 per cent by the end of 2023.’
The current expectation is that the BoE will go for a peak rate of between 4.75-5%, which is likely bringing further tailwinds.
Australian Dollar (AUD) Weakens amid Souring Market Mood
The Australian Dollar (AUD) is trading weakly this morning, as a tepid market mood serves to undercut the ‘Aussie’.
While the latest Chinese GDP data showed an impressive recovery, analysts have begun to question the longevity. This is because the increase was largely led by consumers while private investment lagged.
Fu Linghui, Spokesperson for the National Bureau of Statistics of China, commented:
‘The international environment is still complex and ever-changing, constraints from insufficient domestic demand are obvious and the foundation for economic recovery is not solid.’
Because of these concerns, AUD is unable to capitalise on the economic growth despite being a Chinese proxy-currency.
Furthermore, with Sino-American tensions continuing to simmer over Taiwan, AUD may be unable to gain ground. These geopolitical tensions could be contributing to the tepid trade seen this morning.
GBP/AUD Exchange Rate Forecast: UK Retail Weakness to Dent GBP?
Looking ahead for the Pound, Friday brings the release of the latest retail sales data. A fall is expected, from 1.2% in February to -0.5% in March. If this prints accurately, it may weigh on Sterling by showing signs of weakness in the UK retail sector.
Later, the latest set of private sector indexes are due to print. Services is expected to remain in growth territory, while manufacturing is forecast to tick up to 48.5. If this prints accurately, it may buoy Sterling by reflecting improved economic activity.
For the Australian Dollar, the latest Judo Bank PMI flashes are due early Friday. Both Australian private sectors are expected to remain in contraction, which could dent the ‘Aussie’.