Pound Australian Dollar (GBP/AUD) Exchange Rate Dips amid Refreshed RBA Rate Hike Bets

Pound Australian Dollar (GBP/AUD) Exchange Rate Tumbles as RBA Hike Bets Rise

The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning, following renewed Reserve Bank of Australia (RBA) interest rate hike bets.

At the time of writing, GBP/AUD is trading at around AU$1.9138, a fall of just under 0.5% from the morning’s opening rates.

Australian Dollar (AUD) Rises as Bullock Indicates Future Rate Hikes

The Australian Dollar (AUD) is on the march this morning, following renewed predictions of an interest rate hike in November.

This morning, Reserve Bank of Australia Governor Michele Bullock answered questions about monetary policy from the Australian Senate.

Many queries revolved around the recent spike in inflation, and whether or not this constituted a ‘material change’.

In response to this, Bullock stated:

‘We’re looking at some of the more persistent parts of inflation [and] asking ourselves, are there signs that those might be coming down in the future? Even though we haven’t raised interest rates since our last interest rate rise in June, we’ve made it very clear that we might need to go again.’

Following this, Westpac became the last of the four major Australian banks to pencil in a rate hike in November.

While Bullock maintained caution, the renewed bets are serving to lift AUD exchange rates, despite the bearish market mood.

Pound (GBP) Undermined by Sombre Trade

The Pound (GBP) is struggling to attract support from investors this morning, amid a continued drought of data.

Because of this, the increasingly risk-sensitive Pound is left exposed to shifts in risk appetite. Following news that Israel has begun to conduct ‘targeted raids’ with tanks in Gaza, worries about the conflict are flaring.

The war has increasingly weighed on the market mood recently, as tempers continue to flair in the region. Signs of a split amongst Western territories over the extent of Israel’s retaliation have emerged too.

This has prompted elevated concerns that other territories could be embroiled in the war. As such, investors are seeking safer investment opportunities, leaving GBP weakened.

Pound Australian Dollar Exchange Rate Forecast: AU PPI Increase to Boost AUD?

Looking ahead for the Australian Dollar, the core catalyst of movement is likely to come tomorrow, wherein the latest PPI data is expected.

On a quarter-by-quarter basis, PPI is forecast to have increased by 1.2% in Q3, which may boost the ‘Aussie’. Producer inflation usually filters through to consumer prices, and this could prompt an increase in rate hike bets, bringing strength to AUD.

This is followed by the latest Chinese industrial profits data. Thus far this year, profits are forecast to have decreased by 9% in September annually. If this prints in line with forecasts, due to AUD’s nature as a Chinese proxy-currency, it could weaken.

The Pound, meanwhile, is unlikely to gather pace through to the end of the week. Data releases are set to remain in short supply, which will most likely limit Sterling’s movement.

Additionally, if the market mood remains risk-off, GBP may be unable to gain a foothold against safer assets.

John Mulcahey

Contact John Mulcahey


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