Pound Australian Dollar (GBP/AUD) Exchange Rate Stays Flat amid Bullish Market Mood
(Article updated 16:15, 4/7/23) The Pound Australian Dollar (GBP/AUD) exchange rate is sticking in narrow boundaries this afternoon, as a bullish market mood benefits the ‘Aussie’.
While both currencies are lifted above safer assets such as the US Dollar (USD), the Australian Dollar is more sensitive to these upbeat swings than Sterling.
Furthermore, the continued bets that the Reserve Bank of Australia (RBA) would resume tightening in August is likely underpinning AUD.
At the time of writing, GBP/AUD is trading at around AU$1.9015, showing little change from the morning’s opening rates.
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Pound Australian Dollar Exchange Rate Flat Following RBA Pause
The Pound Australian Dollar exchange rate is seeing muted trade this morning, following a pause from the Reserve Bank of Australia (RBA).
At the time of writing, GBP/AUD is trading at around AU$1.9000, showing little deviation from the morning’s opening rates.
Australian Dollar (AUD) Muted as RBA Pauses Rate Hike Cycle
The Australian Dollar (AUD) is seeing limited trade this morning, following the latest interest rate decision from the Reserve Bank of Australia.
Earlier, the RBA elected to pause their current tightening cycle, going against expectations of another 25bps increase. However, RBA Governor Phillip Lowe indicated that ‘further tightening of monetary policy may be required.’
Lowe further explained the RBA’s decision, stating:
‘In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the forecasts for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.’
Furthermore, analysts still expect at least one additional rate hike in August, which could bring the terminal rate to a peak of 4.35%. The Australian economy appears to be in a very precarious position, engendering caution so far today.
Elsewhere, a mixed market mood could be further preventing the ‘Aussie’ from gaining firm support, due to its risk-sensitive nature.
Pound (GBP) Rudderless amid Overtightening Fears
Meanwhile, the Pound (GBP) is trading listlessly this morning, as a lack of data releases keeps the focus on the UK economy.
The Bank of England’s (BoE) tightening cycle is remaining under similar scrutiny, with fears of overtightening continuing to simmer.
Some investors are anticipating another 50bps hike in August, as stubbornly high inflation continues to grip the UK. Similarly, criticism towards the BoE has amplified in recent times, potentially indicating a hike wrought as an attempt to restore credibility.
With a terminal rate of 6% suggested by some analysts, the prospect of a hard economic landing is weighing on Sterling.
Elsewhere, indications that food inflation is beginning to fall could be further pressurising Sterling. During a report this morning, supermarket chain Sainsbury’s found that food inflation had eased to 15.4% in May.
This news, while showing that food inflation remains shockingly high, could be prompting diminished bets on further tightening.
GBP/AUD Exchange Rate Forecast: Chinese Data in Focus
Looking ahead for the Australian Dollar, Chinese data may serve as the main catalyst of movement. Tomorrow, the latest Caixin services PMI is due to print, reflecting June’s activity.
With a downtick forecast, this could indicate a less-than-stellar economic recovery. Owing to its status as a Chinese proxy-currency, the tepid recovery may sap sentiment towards the ‘Aussie’.
For the Pound, the final reading of June’s services index is due on Wednesday. With the UK’s economic health under close examination, if the print is revised downward it could dent Sterling.