Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound as Market Mood Remains Cautious
(Updated 16:28 08/06/23)
The Pound Australian Dollar (GBP/AUD) exchange rate is trading close to its starting position this afternoon. A persistently cautious market mood may have be helping the pairing to regain lost ground.
Bank of England (BoE) rate hike may also be continuing to lend strength to the exchange rate. Markets are anticipating that UK interest rates are still far from their peak after forecasts that the UK will see some of the highest inflation of any major economy in 2023.
Speaking on the BoE’s forward path, Shaun Osborne from Scotiabank said:
‘It should also be no surprise that markets are still pricing close to another 100 basis points of BoE tightening over the coming months to combat price gains.’
At time of writing the GBP/AUD exchange rate is at around AU$1.8638, which is virtually unchanged from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Drops despite Risk-Off Mood
The Pound Australian Dollar exchange rate is slipping today despite a cautious market mood. Reserve Bank of Australia (RBA) rate hike bets may be pulling the pair lower.
On the other hand, GBP/AUD may be seeing its losses cushioned by Bank of England rate hike bets.
At time of writing the GBP/AUD exchange rate is at around AU$1.8650, which is down roughly 0.2%.
Australian Dollar (AUD) Climbs as Leading Chinese Banks Slash Interest Rates
The risk-sensitive Australian Dollar (AUD) is making gains today despite a pullback in global risk appetite. The ‘Aussie’ may be continuing to find support from RBA rate hike bets, as well as positive news from China’s banking sector.
Markets are continuing to price in further rate hikes from the Australian central bank after its surprise interest rate increase earlier this week. In guidance released alongside the decision, the RBA hinted that it may act depending on ‘how the economy and inflation evolve’.
Speaking on the RBA’s forward path, ING’s Head of Asia-Pacific Research Robert Carnell said:
‘Risks to this view remain firmly on the upside, however. It would only take some acceleration in wage costs, some climate or other supply shock or more notable increases in house prices to shift the balance to one further (and probably final) hike.’
News that China’s biggest banks will be cutting interest rates on Yuan deposits may also be lifting AUD today. Four of the country’s largest banks have slashed rates in a bit to reduce lending costs and bolster China’s faltering economy.
Gary Ng, Asia Pacific senior economist of Natixis, said:
‘The deposit rate cuts will push savings into consumption and investment and ease the pressure on banks’ net interest margins (NIM), opening the door for further monetary stimulus.’
Finally, a rise in the price of coal and iron ore may be keeping the Australian Dollar buoyed.
Pound (GBP) Ticks Higher amid BoE Bets
The Pound (GBP) is edging higher today. Sterling is catching limited bids amid thin trading conditions as investors next week’s high-impact employment data.
Bets on a 5.5% peak in BoE interest rates by the end of 2023 may be pushing GBP higher. Markets are continuing to price in aggressive tightening from the central bank as UK inflation remains stubbornly high.
However, signs of slack in the UK labour market may be weighing on Sterling today. A survey conducted by the Recruitment and Employment Confederation (REC) found a sharp drop in hiring levels. The survey is closely watched by the BoE as a gauge of the state of the UK’s jobs market.
GBP/AUD Exchange Rate: Will Hot Chinese Inflation Data Boost AUD?
Looking ahead to the rest of the week, the latest Chinese inflation data could bolster AUD on Friday if it prints as forecast. May’s rate of inflation is expected to tick higher by 0.3%. The figures could also increase hopes of a quick recovery in the world’s second-largest economy, as well as the reduced prospect of disinflation.
Shifts in the ‘Aussie’ may also be driven by any RBA rate hike bets this week, as well as movement in the price of iron ore.
The Pound, meanwhile, will see no other significant this week. Movement in Sterling could be inspired by bets on additional policy tightening from the BoE.