Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates on Downbeat BoE Speech

Pound Australian Dollar (GBP/AUD) Wavers on Cautious BoE Comments

(Updated 17/5/23, 16:45)

The Pound Australian Dollar (GBP/AUD) exchange rate is still rangebound this afternoon after Bank of England (BoE) Governor Andrew Bailey poured cold water on further rate hike expectations. Talking at the British Chamber of Commerce annual conference, Bailey admitted that the labour market appears to be cooling. He also mentioned how the impact of high interest rates are still making their way through the economy. Despite inflation remaining sky high, the prospect of the central bank pausing their tightening cycle could be weighing on Sterling.

At time of writing, the GBP/AUD exchange rate is around $1.8750, relatively unchanged from this morning’s opening levels.

Original article continues below…

GBP/AUD Fluctuates amid Wavering Market Mood

The Pound Australian Dollar exchange rate is rangebound amid a wavering market mood. Optimism surrounding the US debt ceiling is cheering the markets, but global slowdown fears linger.

At time of writing, the GBP/AUD exchange rate is around $1.8721, relatively unchanged from this morning’s opening levels.

Australian Dollar (AUD) Supported by Debt Ceiling Optimism

Meanwhile, the Australian Dollar (AUD) has also been left vulnerable to market sentiment amid a lack of data. In the wake of worse-than-expected Chinese economic data, the ‘Aussie’ struggled to strengthen amid a downbeat market mood. However, reports of positive negotiations surrounding the debt ceiling debate in the US could be providing a modicum of positivity. A lift to market moods, could also be supporting the ‘Aussie’.

The ongoing meetings between President Joe Biden and House of Representatives Speaker Kevin McCarthy ended on an upbeat note yesterday. McCarthy told reporters that a deal by the end of the week could well be possible. With fears that if the US defaulted on government debts, the financial fallout could be disastrous. Treasury Secretary Janet Yellen on Tuesday warned that it could cause a recession that would destroy American jobs and businesses, adding:

‘It is very conceivable that we’d see a number of financial markets break – with worldwide panic triggering margin calls, runs and fire sales.’

With talks turning positive, with a resolution in sight, global market sentiment would be buoyed on the news, lifting the risk-sensitive ‘Aussie’.

Pound (GBP) Quiet ahead of BoE Speech

The Pound (GBP) is remaining subdued this morning amid a lack of economic data. With a speech from Bank of England (BoE) Governor Andrew Bailey later this morning, GBP investors remain cautious surrounding the next moves from the central bank.

With disappointing labour market news from yesterday, Bailey could echo his sentiments from last week. After a 25bps rate hike from the BoE, Bailey hinted at a pause in the tightening cycle. He is also set to comment on the UK’s struggling rate of productivity growth, highlighted by the softer-than-expected employment data from yesterday.

However, with inflation still sky-high, far above the target rate of 2%, elevated interest rate hike bets could be providing Sterling some modest support.

Pound Australian Dollar Exchange Rate Forecast: Dovish Bailey to Sour Sterling?

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with a speech from Bailey at the British Chambers of Commerce Global Annual Conference this morning. After the central bank’s dovish interest rate hike last week, and the latest employment data, Bailey could send the Pound lower on a dovish rhetoric.

Elsewhere, the Australian Dollar could soften on a cooling labour market of their own. Despite unemployment set to remain at a record-low of 3.5%, employment change is set to slow down. A cooling labour market could see pared rate hike expectations from the Reserve Bank of Australia (RBA).

Danny Tingle

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