Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs as Markets Brace for BoE
(Updated 17:00, 16/06/23) The Pound Australian Dollar (GBP/AUD) exchange rate rallied this afternoon as markets bet on the UK currency ahead of the upcoming Bank of England (BoE) interest rate decision.
The GBP/AUD had initially experienced choppy trade. Concerns about the UK economy put some pressure on the Pound (GBP) while a cheery mood supported the risk-sensitive Australian Dollar (AUD).
However, Sterling gathered strength as the day progressed. Markets are anticipating hawkish action from the BoE, and traders scrambled to bet on the Pound at the end of the week in preparation for next week’s session.
At the time of writing, GBP/AUD was trading at around AU$1.8664, up 0.5% on the day.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates in Thin Trading Conditions
The Pound Australian Dollar (GBP/AUD) exchange rate is facing choppy trade today as a lack of economic data and tailwinds on both sides cause the currency pair to waver.
At the time of writing, GBP/AUD is trading at around AU$1.8598, having moved between AU$1.8548 and AU$1.8616.
Pound (GBP) Mixed despite BoE Bets
The Pound (GBP) is facing mixed movement against the Australian Dollar (AUD) today as a lack of economic data leaves the UK currency vulnerable to fluctuations.
However, hawkish expectations ahead of the Bank of England (BoE) interest rate decision next week are keeping the Pound underpinned.
As the UK labour market is still tight, inflation remains high and the economy is more resilient than expected, markets are betting on the BoE delivering multiple further rate hikes.
This has seen the Pound strengthen against many of its peers this week and is keeping it afloat today against the ‘Aussie’ Dollar.
That said, there are concerns about the economic impact of rising interest rates. News emerged today that more and more British businesses are failing, with higher borrowing costs being a key factor.
David Kelly, Head of Insolvency at PwC, explains:
‘Today’s data shows that the number of insolvencies in May has shot up, following a brief dip in April due to the Easter break. The 2,552 insolvencies is the highest monthly number we’ve seen this year so far and, given that trading conditions remain extremely challenging, the number will likely continue to climb through the second half of the year.
‘In addition, rising interest rates have been a blow to struggling businesses, with the potential for more pain when the Bank of England meets next week to decide the base rate.’
Amid the lack of data, worrying economic news and hawkish BoE bets, Sterling is facing mixed movement.
Australian Dollar (AUD) Buoyed by Risk-On Mood
Meanwhile, AUD exchange rates are enjoying some support. Today, equity markets are in the green as risk appetite returns.
The upbeat tone comes as investors scale back bets for more interest rate rises from the Federal Reserve, after yesterday’s US jobless claims came in higher than expected. This is lifting the risk-sensitive Australian Dollar.
Similarly, a positive tone in the commodity markets is aiding the resource-linked ‘Aussie’. The prices of gold, coal and iron – all key Australian exports – are improving today, lending AUD support.
The Australian Dollar’s movement may be muted due to it being the European trading hours. This could be capping the upside for AUD.
GBP/AUD Exchange Rate Forecast: Muted Movement Ahead of an Eventful Week?
Looking ahead, Friday’s trade could see limited movement as there are no key data releases due out.
Amid the lack of data, risk appetite could drive the GBP/AUD exchange rate. If the market mood remains upbeat, the riskier ‘Aussie’ could climb against the Pound. However, BoE interest rate rise bets could cushion the UK currency.
Next week looks set to bring some big swings in GBP/AUD. In the early hours of Tuesday morning, we could see AUD strengthen. The People’s Bank of China (PBoC) is set to cut interest rates to stimulate economic growth, which in turn would likely boost the China-proxy Australian Dollar.
In addition, the minutes from the last RBA policy meeting are out. If they show a hawkish consensus among policymakers, AUD is likely to strengthen.
However, Sterling could rally through the latter part of the week. The Bank of England meets to set interest rates on Thursday. A hawkish tone from the BoE could see the Pound soar.