Pound Australian Dollar Exchange Rate to Strike New One-Year High amid Bearish Trade?

Pound Australian Dollar Exchange Rate Remains Bid amid Cautious Mood

(Updated 09:00, 25/5/23) The Pound Australian Dollar (GBP/AUD) exchange rate continue to catch bids this morning, leading the pairing to edge closer to a one-year high.

The GBP/AUD exchange rate is now only a cent off the high struck at the end of April. After climbing roughly two cents since the start of this week.

AUD exchange rates continue to be buffeted by risk off flow, with investors increasingly favouring safe-haven currencies like the US Dollar (USD) amid concerns over US debt ceiling talks.

However potentially hindering the chances of the GBP/AUD exchange rate striking a new high is a lack of underlying support for the Pound, which is struggling to find momentum despite yesterday hotter-than-expected UK inflation figures.

GBP/AUD Exchange Rate Strengthens on Global Growth Concerns

(Updated 15:10 24/3/2022) The Pound Australian Dollar (GBP/AUD) exchange rate has found renewed support this afternoon amid fresh concerns over the resilience of the global economy.

The prospect of higher interest rates in the US and Europe, coupled with the risks posed by a possible US debt default appear to be stoking recession fears.

Skittish investors are also steering clear of the risk-sensitive ‘Aussie’ ahead of the publication of the minutes from the Federal Reserve latest policy meeting.

While it remains up against the Australian Dollar, the Pound is otherwise struggling to consolidate its post inflation gains amid concerns higher UK interest rates could undermine UK growth.

Original article continues below:

Pound Australian Dollar Exchange Rate Firms Following Dovish RBNZ Rate Hike

The Pound Australian Dollar (GBP/AUD) exchange rate is currently trading at its highest levels since the start of May. The pairing having jumped in the wake of the Reserve Bank of New Zealand’s (RBNZ) latest interest rate decision.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8886. Up roughly 0.6% from today’s opening rate.

Australian Dollar (AUD) Pressured as Dovish RBNZ Undermines RBA Rate Hike Bets

The Australian Dollar (AUD) fell sharply during the Asian trading session, following the latest RBNZ rate decision.

The RBNZ raised interest rates by 25bps as was expected. But investors were caught off-guard as the RBNZ also signalled its hiking cycle is now over. Markets had widely expected the bank to hint at further hikes.

RBNZ Governor Adrian Orr, said there are clear signs the previous rate hikes are feeding through into the NZ economy:

‘It is quite nice to see some of the things we were hoping would already be here actually be here. And that is the lower surprise on GDP, the decline in inflation and all the indicators that suggest the interest-sensitive parts of the New Zealand economy are yielding.’

The decision weighed heavily on the Australian Dollar as markets see the RBNZ’s decision to end its hiking cycle and relieving pressure on the Reserve Bank of Australia (RBA) to also continue raising rates.

Adding to the pressure on AUD exchange rates this morning is a prevailing risk-off mood.

Investors are erring on the side of caution amid growing fears of a possible US default as debt ceiling talks remain deadlocked.

Pound (GBP) Firms amid Spike in Core Inflation

The Pound (GBP) is trending broadly higher this morning, following the publication of the UK’s consumer price index.

According to data published by the Office for National Statistics (ONS), the UK’s headline inflation rate fell from 10.1% to 8.7% in April. This was the first time inflation fell below double digits since August, but it was also higher than the drop to 8.2% forecast.

But it’s the core CPI figures which are in the spotlight today. As underlying inflation unexpectedly jumped from 6.2% to a 31-year high of 6.8%.

The stronger-than-expected inflation figures are underpinning the Pound this morning as they bolster Bank of England (BoE) rate hike bets.

The BoE is now expected to deliver another 25bps hike at its June meeting.

Pound Australian Dollar Forecast: Rebound in UK Retail Sales to Strengthen Sterling?

The Pound Australian Dollar (GBP/AUD) exchange rate may extend its gains into the second half of the week as the UK publishes its latest retail sales data.

April’s figures are expected to report UK sales growth rebounded from -0.9% to 0.3%. Signs that consumer demand remains resilient could help to reinforce bets for a June rate hike from the BoE.

In contrast, Australia’s own retail sales figures are expected to report a slowdown in sales growth last month. Will this pile more pressure on the Australian Dollar?

Matthew Andrews

Contact Matthew Andrews

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