Pound Australian Dollar (GBP/AUD) Exchange Rate Trims Gains as Market Mood Sours
(Article updated 16:50, 11/5/23) The Pound Australian Dollar (GBP/AUD) exchange rate is trimming it’s gains this afternoon, as the market mood turns sour.
As the Australian Dollar (AUD) is particularly risk-sensitive, this downbeat trade is allowing GBP/AUD to remain elevated.
Furthermore, continued analysis of the Bank of England’s (BoE) interest rate decision has proved less than optimistic. Interest rates are still seen to be moving through the UK economy, with the expectation turning sombre.
Suren Thiru, Economics Director at ICAEW, commented:
‘The Monetary Policy Committee needs to be more forward looking in setting interest rates rather than being overly focused on current inflation given the long-time lag between rate rises and its impact on the broader economy.’
At the time of writing, GBP/AUD is trading at around AU$1.8684, a rise of around 0.35% from today’s opening rates.
Original article continues below:
Pound Australian Dollar Exchange Rate Climbs as BoE Raises Interest Rates to 15-Year High
(Article updated 13:57, 11/5/23) The Pound Australian Dollar exchange rate is remaining elevated this afternoon. The Bank of England (BoE) delivered the expected 25bps hike, raising rates to their highest level since 2008.
In their accompanying statement, the BoE struck a hawkish tone and left the door open for further tightening. They stated:
‘If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.’
Between the hawkish comments and persistent weakness in the Australian Dollar, GBP/AUD has remained elevated.
At the time of writing, GBP/AUD is trading at around AU$1.8701, a rise of over 0.4% from today’s opening rates.
Original article continues below:
Pound Australian Dollar Exchange Rate Rises as Chinese Inflation Drops
The Pound Australian Dollar exchange rate is strengthening this morning, as a sharp cooldown in Chinese inflation weighs on the ‘Aussie’.
At the time of writing, GBP/AUD is trading at around AU$1.8680, a rise of just over 0.3% from today’s opening rates.
Australian Dollar (AUD) Dips as Chinese Inflation Cools Rapidly
The Australian Dollar (AUD) is weakening this morning, following the publication of the latest Chinese inflation data.
The Chinese consumer price index rose by 0.1% in April on a yearly basis. As a sharp cooldown from March’s 0.7% gain, this is sparking concerns over disinflation in the Chinese economy.
As the ‘Aussie’ functions as a Chinese proxy-currency, the jitters are extended towards it. On top of the fall in CPI, producer deflation appeared to deepen last month, and highlights the economic superpower’s struggle to recover.
Ting Lu, Chief China Economist at Nomura, commented:
‘Amid a weakening post-Covid recovery, the PBOC’s guidance to cut deposit rates, ongoing disinflation, falling market rates and the Fed signalling a potential pause, we continue to believe a PBOC policy lending rate cut is becoming more likely.’
However, an increase in Australian consumer inflation expectations could be cushioning against some losses. Expectations were found to have increased to 5% for May, which may bring further impetus for rate hikes.
Pound (GBP) Calm ahead of BoE Interest Rate Decision
The Pound (GBP) is trading quietly this morning, as the spotlight remains on the Bank of England’s (BoE) interest rate decision.
Due at noon, investors are waiting to see what forward guidance may accompany the expected 25bps interest rate hike.
However, the BoE’s future course remains up in the air. Some anticipate further tightening, whereas others are less convinced.
Ellie Henderson, an Economist at Investec, commented:
‘As things stand and considering the sharp downward influences on inflation in the coming months, namely from energy but also from cooling food and goods price inflation, we suspect that this could be the last hike by the Bank of England in this cycle.’
GBP/AUD Exchange Rate Forecast: UK GDP to Boost GBP?
Tomorrow brings the release of the latest set of UK GDP data, likely to be GBP’s core catalyst of movement.
An expansion in Q1 of 0.1% is forecast against the previous quarter. Because of this, GBP investors may cheer at signs that the UK has dodged a recession and bring strength to Sterling.
However, this may indicate little in the way of accelerated growth. As such, any gains may be capped as the UK economy continues to struggle.
For the Australian Dollar, Westpac are due to release their latest consumer confidence data over night. A fall is forecast in the index, from 85.8 to 82.1 in May.
If this prints in line with expectations, it may weigh on the ‘Aussie’ as consumer sentiment remains downbeat. Further falls could indicate growing pessimism. Previous indexes have pointed to interest rates as a key bugbear for consumers the recent hike may dent the index.