Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs on Further BoE Rate Hike Bets
(Article updated 16:30, 7/6/23) The Pound Australian Dollar (GBP/AUD) exchange rate is strengthening this afternoon, as Bank of England (BoE) rate hike bets increase.
Investors have now begun to fully price in a 25bps hike at the BoE’s June meeting, bringing support to Sterling. The bank is coming under consistent pressure to tackle inflation in the UK, before it becomes embedded in the economy.
However, these gains may be being tempered by the persistent lack of data seen through the day’s session.
Furthermore, the market mood appears to have improved, which may be lending further strength to Sterling.
At the time of writing, GBP/AUD is trading at around AU$1.8684, rising by just under 0.4% from the morning’s opening rates.
Original article continues below:
Pound Australian Dollar Exchange Rate Wavers amid AU GDP Disappointment
The Pound Australian Dollar exchange rate is trading in narrow boundaries this morning. The ‘Aussie’ is seeing its gains tempered by a disappointing GDP data release.
At the time of writing, GBP/AUD is trading at around AU$1.8589, showing little movement from the morning’s opening rates.
Australian Dollar (AUD) Tempered by Lacklustre GDP Data
The Australian Dollar (AUD) is seeing its appeal tempered this morning, as a lacklustre GDP release counters hawkish rhetoric.
While this morning’s data for Q1 showed 0.2% growth, this was below forecasts of 0.3%. Furthermore, it indicates a clear cooldown on a quarterly basis, down from 0.6% growth.
With this being the slowest growth rate for the economy in over a year, investors appear concerned over Australia’s economic health. Furthermore, the Reserve Bank of Australia’s (RBA) interest rate hikes are viewed as a cause.
Australian Treasurer Jim Chalmers commented:
‘The rise in interest rates is clearly biting. Households are pulling back on spending; they’re saving less and they’re paying more in interest.’
This downbeat news is likely serving to temper gains brought forth by hawkish statements from RBA Governor Phillip Lowe.
In a speech, Governor Lowe outlined that it was ‘too early to declare victory against inflation’. On the back of this sentiment, Goldman Sachs stated that an OCR peak of 4.85% was now possible.
Lowe further stated:
‘June rate rise followed information suggesting greater upside risks to bank’s inflation outlook. Some further tightening of monetary policy may be required, depending on how economy and inflation evolve.’
Pound (GBP) Flat amid Continued Data Drought
The Pound (GBP) is continuing the week’s theme of minimal trade this morning, as a lack of data weighs on sentiment.
Because of this, Sterling’s increasingly risk-sensitive nature may be prompting cautious trade, amid the morning’s cautious mood.
However, cushioning Sterling may be persistent interest rate hike bets. The UK is expected to have the highest inflation among big economies in 2023 by the Organisation for Economic Co-operation and Development (OECD).
GBP/AUD Forecast: AU Trade Surplus Dip to Dent AUD?
Looking ahead for the Australian Dollar, the core catalyst of movement is likely to be tomorrow’s balance of trade figures.
As an export focused economy, forecasts of a fall in Australia’s trade surplus could weigh on the ‘Aussie’. However, if it prints above expectations, AUD could see a boost.
On Friday, the latest Chinese inflation data is due to print. As the ‘Aussie’ is a Chinese proxy-currency, forecasts of a 0.2% increase in inflation could yield gains, as it would indicate the economic superpower is managing to avoid deflation.
Meanwhile, the Pound is unlikely to see much in the way of directional trade as the data drought continues. With no meaningful releases on the cards through to the end of the week’s session, Sterling may be left vulnerable to market dynamics.
For instance, if the market mood sours, the increasingly risk-sensitive currency could lose out against safer peers.