Pound Australian Dollar (GBP/AUD) Exchange Rate Soars, Is the RBA’s Hiking Cycle Over?

GBP/AUD Exchange Rate Surges on RBA Rate Decision

The Pound Australian Dollar (GBP AUD) exchange rate trades close to a two-week high this morning, in the wake of the Reserve Bank of Australia’s (RBA) latest interest rate decision.

At the time of writing the GBP AUD exchange rate is trading at around AU$1.9731. Up roughly 1% from this morning’s opening levels.

Australian Dollar (AUD) Nosedives as RBA Likely Done With Tightening

The Australian Dollar (AUD) faces significant selling pressure this morning, after the RBA delivered its latest interest rate decision.

As was widely forecast, the RBA opted to leave rates on hold at 4.1% this month. The third consecutive month the bank has left its monetary policy untouched.

In his final statement as RBA Governor, Philip Lowe claimed that ‘inflation in Australia has passed its peak.’

While Lowe didn’t explicitly rule out raising rates again in the future, the Australia Dollar plunged as most investors appeared convinced the bank’s hiking cycle is over.

Tony Sycamore, market analyst at IG, comments:

‘While RBA Governor Lowe may have been slow to start hiking rates, he departs with his head held high, knowing that much of the heavy lifting required to bring inflation under control is in place ahead of Michele Bullock’s tenure.’

Further exacerbating the ‘Aussie’s losses was the release of some disappointing Chinese data. The Caixin services PMI fell from 54.1 to 51.8 in August. Missing forecasts for a more modest decline to 53.6 and slumping to its lowest levels since the lifting of China’s Covid restrictions.

Pound (GBP) Struggles Despite Upwardly Revised PMI

While it is trading positively against the Australian Dollar, the Pound (GBP) is struggling to replicate this success against its other peers.

Sterling’s struggle to attract support comes despite an upwards revision to the UK’s latest services PMI. August’s finalised services index printed at 49.5, up from a preliminary reading of 48.3.

Despite the positive revision, this still marks the service sector’s first contraction of growth since January. This in turn is stoking UK recession fears and dragging on the Pound this morning.

Pound Australian Dollar Forecast: Uptick in GDP to Revive the ‘Aussie’?

Looking ahead, the Pound Australian Dollar exchange rate may relinquish some of its gains on Wednesday, with the publication of Australia’s latest GDP data.

The figures are expected to report Australia’s economy expanded by 0.3% in the second quarter. This would be up from 0.2% in Q1 and be another signal of the country’s economic resilience.

On the other hand, the modest uptick in growth is unlikely to be enough to convince the RBA to raise interest rates again, so any upside in the ‘Aussie’ may prove limited.

Meanwhile, the Pound may struggle to find direction through the remainder of the week, in the absence of any notable GBP data.

Matthew Andrews

Contact Matthew Andrews

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