Pound Australian Dollar (GBP/AUD) Exchange Rate Stays Flat amid Cautious Market Mood
(Article updated 16:44, 21/6/23) The Pound Australian Dollar (GBP/AUD) exchange rate has remained trapped in narrow boundaries this afternoon, amid a souring market mood.
With investors growing more concerned over global growth following Federal Reserve Chair Jerome Powell’s indication of future rate hikes, trade has slowed greatly for the ‘Aussie’.
Similarly, the lack of optimism for the UK’s economic outlook ahead of tomorrow’s rate hike is continuing to weigh on Sterling.
At the time of writing, GBP/AUD is trading at AU$1.8779, showing little movement from the morning’s opening rates, but edging lower over the course of the session.
Original article continues below:
Pound Australian Dollar Exchange Rate Rangebound Despite Shock Core Inflation Jump
The Pound Australian Dollar exchange rate is trading narrowly this morning, despite a shock jump in UK core inflation.
At the time of writing, GBP/AUD is trading around AU$1.8808, showing little movement from the morning’s opening rates.
Pound (GBP) Stumbles as Economic Fears Counter Red-Hot Inflation
The Pound (GBP) is stumbling this morning, as a shock jump in core inflation appears to have sparked economic anxiety.
This morning, core inflation jumped above forecasts to 7.1%. Markets are reacting thus far by pricing in a terminal rate of 6%, heaping pressure on the Bank of England (BoE).
Analysts consider a rate hike tomorrow all but confirmed, with a further hike now expected in August. Furthermore, a 50bps hike appears to be on the cards, as explored by analysts at Capital Economics:
‘The consensus remains for a smaller increase, but the markets are pricing in a 50% chance of larger move. Accordingly, a failure to deliver could cause financial conditions to loosen and the pound to weaken, which is the last thing that policymakers at the Bank need right now.’
Elsewhere, a bearish market mood may be adding further pressure to Sterling. With the currency holding an increasingly risk-sensitive
Australian Dollar (AUD) Weakens as Post-Minutes Sell-Off Continues
The Australian Dollar (AUD) is weakening against most peers this morning, as the recent Reserve Bank of Australia (RBA) minutes continue to sap sentiment.
The minutes indicated that the recent surprise hike was ‘finely balanced’ which led to something of a course-correction. This sell-off and repricing is likely to be the continued cause of the ‘Aussie’s weakness.
The minutes stated:
‘Members recognised the strength of both sets of arguments, concluding that the arguments were finely balanced. They judged, though, that the case to raise the cash rate at this meeting was the stronger one.’
Furthermore, a lack of impactful data releases could be preventing AUD from seeing much directional trade.
Elsewhere, a muted market mood could be further dampening the ‘Aussie’ this morning due to the ‘Aussie’s risk-sensitive nature.
GBP/AUD Exchange Rate Forecast: Bumper BoE Hike on the Cards?
Looking ahead for the Pound, the stage is firmly set for tomorrow’s interest rate decision from the BoE.
The question now is two-fold: 25 or 50bps, and what stance will they take? The pressure is firmly on the bank to control inflation, but they are very aware of the UK’s economic stability.
A 50bps hike could bolster Sterling, as would hawkish guidance, but jitters over the UK’s economic health may trim these gains somewhat.
For the Australian Dollar, the main driver of movement is likely to come on Friday. Then, the latest private sector indexes are scheduled to be published.
Both services and manufacturing indexes are forecast to cool, which could weigh heavily on the ‘Aussie’. If the private sector does weaken, it may be a sombre omen for the Australian economy.