Pound Australian Dollar Exchange Rate Fluctuates on Tempered Rate Hike Bets
The Pound Australian Dollar (GBP/AUD) exchange rate is trading narrowly amid economic woes and central banks nearing terminal interest rate peaks.
At time of writing the GBP/AUD exchange rate is trading around $1.9542, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Domestic Woes
The Pound (GBP) is continuing its disappointing run as a lack of economic data is leaving it exposed to economic headwinds.
Despite a relatively upbeat market mood, Sterling remains under pressure as investors mull over the health of the UK economy. With recession risks lingering, the support Sterling once enjoyed from the prospects of the Bank of England (BoE) have since vanished. Investors are now expecting the central bank to conclude its tightening cycle.
However, despite the dovish nature of his speech, BoE Governor Andrew Bailey did leave the door open to further hikes. He conceded that persistent high inflation could see additional interest rate increases.
Furthermore, a survey from the Recruitment and Employment Confederation (REC) revealed that demand for staff fell at its fastest rate since 2020. The REC said that UK employers are increasingly anxious over the economic outlook, hinting at a cooling labour market. Neil Carberry, REC Chief Executive, commented:
‘August is always a slower month for new permanent roles. But this has been exacerbated in 2023 by the lack of confidence to start the new hiring we saw among firms in the Spring.’
‘As inflation begins to drop, it is likely that firms will return to the market later in the year. Employer surveys suggest confidence may be returning. But for now, the labour market has more slack than it has since the heights of the first lockdown.’
Australian Dollar (AUD) Quiet amid China Woes and RBA Status Quo
Meanwhile, the Australian Dollar (AUD) also struggled for increased demand amid a lack of data. The ‘Aussie’ is left vulnerable to domestic and international pressures.
Economic conditions in China are not improving, and fresh geopolitical tensions are adding to the pressure. US-China trade tensions are rising as Beijing announce a ban on iPhone usage in all government agencies. Adding fuel to the fire of geopolitical tensions in the ongoing cold economic war. The US Secretary of State also said earlier this week that there won’t be any changes to the US tariffs imposed on China until the completion of a review by the Treasury.
Furthermore, the Reserve Bank of Australia’s (RBA) decision to keep the interest rates unchanged is also playing on investors’ minds. With a lack of fresh hawkish signals since then, a growing expectation that the central bank will keep the status quo until the end of the year could also be sapping demand.
Pound Australian Dollar Forecast: Climbing Chinese Inflation to Buoy the Aussie?
Looking ahead, the Pound Australian Dollar exchange rate could see moderate movement in the overnight session as the latest Chinese inflation data is due to print. A return to positive inflation allays fear of deflation in the world’s second largest economy, which could provide some support for the ‘Aussie’.
Meanwhile, the only data of note for the Pound will be the latest employment data on Tuesday. The jobless rate is predicted to remain unchanged at 4.2%. Whilst wage growth is expected to mildly ease to 8% in the three months to July. Sterling could climb if the labour market remains tight, allowing the central bank to raise interest rates at least once more.