Pound Australian Dollar (GBP/AUD) Exchange Rate Wavers near Two-Week Low

Pound Australian Dollar (GBP/AUD) Exchange Rate Subdued following Hawkish Commentary

The Pound Australian Dollar (GBP/AUD) exchange rate is moving without a clear trajectory this morning in the wake of hawkish commentary from central bank officials.

At the time of writing the GBP//AUD exchange rate is trading at around AU$1.9083, virtually unchanged from this morning’s opening rate.

Pound (GBP) Ticks Up amid Hawkish BoE Comments

The Pound (GBP) is edging higher this morning as Bank of England (BoE) commentary boosts interest rate hike bets, though Sterling remains volatile against the equally strong Australian Dollar (AUD).

BoE Governor Andrew Bailey struck a notably hawkish tone regarding interest rates during a speech in London last night.

Bailey commented:

‘Inflation remains too high, and we need to make sure we get it all the way down to the 2% target.

‘How long a restrictive stance will be needed will ultimately depend on what the incoming data tell us about the outlook for overall consumer price inflation over the medium term. The Monetary Policy Committee’s latest projections indicate that monetary policy is likely to need to be restrictive for quite some time yet.’

Bailey’s unexpectedly hawkish stance, delivered in the wake of significantly cooling UK inflation and ongoing economic slowdown concerns, offers a surprise boost to recently pared rate hike bets today.

Australian Dollar (AUD) Firms after RBA Minutes Released

The Australian Dollar is drifting higher this morning amid the publication of minutes from the Reserve Bank of Australia’s (RBA) latest monetary policy meeting.

Policymakers were recorded to have expressed concerns surrounding domestic inflationary pressures, which led to their most recent rise in interest rates in November.

The minutes state that:

‘Members noted that the risk of not achieving the board’s inflation target by the end of 2025 had increased and that it was appropriate that monetary policy should be adjusted to mitigate this.

‘They agreed there was a risk of inflation expectations increasing [if the pause had been extended] particularly given the Board’s repeated statements that it has a low tolerance for inflation returning to target after 2025.’

Speculation that the RBA remains open to further tightening in order to curb sticky inflation serves to boost rate hike bets today, allowing AUD to gain some ground.

Pound Australian Dollar Forecast: UK Autumn Statement in the Spotlight

Looking ahead, the UK’s annual Autumn Statement is due out on Wednesday. Should the government’s formal economic update indicate that a UK recession remains possible during the winter months, GBP may stumble amid ongoing economic pessimism.

However, many analysts are expecting Chancellor Jeremy Hunt to unveil measures aimed at boosting UK economic growth. If markets respond positively to Hunt’s plans, GBP could climb.

Also coming up on Wednesday, RBA Governor Michele Bullock is due to speak. AUD may rally if Bullock’s commentary falls in line with her recently hawkish stance. However, if Bullock strikes a dovish tone during her speech, RBA rate hike bets may slip amid signs that the RBA has reached the end of its tightening cycle.

The latest UK preliminary PMI surveys are due out on Thursday. Both services and manufacturing surveys are forecast to come in below 50, remaining in contraction territory throughout November. Should the data print in line with forecasts, GBP may slump amid signs that the UK’s economic activity remains weak.

Yasmine Arasteh

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