Pound Australian Dollar (GBP/AUD) Exchange Rate at Two-Week High Following RBA Rate Hold
The Pound Australian Dollar (GBP/AUD) exchange rate is soaring this morning following the Reserve Bank of Australia’s (RBA) decision to hold interest rates.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9211, up approximately 0.7% from this morning’s opening rate.
Australian Dollar (AUD) Plummets following RBA Decision
The Australian Dollar (AUD) is in freefall this morning following the RBA’s decision to leave interest rates on hold.
Despite RBA Governor Michele Bullock’s increasingly hawkish tone regarding monetary policy in recent weeks, the RBA kept its cash rate target at 4.35%. Bullock affirmed overnight that this would enable the RBA to assess the impacts of its previous hikes on the wider economy, offering a notably more dovish stance.
Analysts at Barclays commented:
‘The statement, in our view, was less hawkish than November’s and also less hawkish than we expected. We continue to think the hiking cycle is over, though we do note the bank’s data dependent approach means the possibility of another hike after the Q4 inflation print.’
With no further rate hikes possible until February 2024 at the earliest, AUD sentiment waned overnight. Amid pared rate hike bets, ongoing risk aversion leaves the ‘Aussie’ rudderless this morning.
Pound (GBP) Fluctuates following Services PMI
The Pound (GBP) continues to trade without a clear direction this morning despite an upbeat services PMI.
The finalised index came in higher-than-forecast today at 50.9, reporting the first expansion in the vital services sector since July of this year. Today’s print also showed an upward revision from last week’s preliminary estimate of 50.5.
S&P Global noted:
‘UK service providers moved back into expansion mode during November as stabilising demand conditions helped to lift business activity from its recent malaise. Although only marginal, the upturn in service sector output was the fastest since July and slightly stronger than the earlier ‘flash’ estimate for November.’
Signs of economic expansion may serve to lift Sterling sentiment as the session continues. In the meantime, cautious trade continues to buoy GBP against its more risk-sensitive peers.
Pound Australian Dollar Exchange Rate Forecast: Australian GDP in Focus
Looking ahead, Australia’s latest GDP data is due for release overnight. Growth in the third quarter is forecast to remain at 0.4%, while economists also expect the annual growth rate to have fallen to 1.8%. Sluggish economic growth may serve to reinforce speculation that the RBA has concluded its tightening cycle, thereby denting the ‘Aussie’.
Looking to the UK, Bank of England (BoE) Governor Andrew Bailey is due to speak tomorrow morning. While commentary from BoE policymakers has been increasingly hawkish in recent weeks, further indication of restrictive monetary policy may lift GBP. However, an ongoing lull in UK data releases may prevent any significant movement following Bailey’s speech, as investors await supporting economic reports.
In the meantime, the Pound Australian Dollar exchange rate may be vulnerable to shifts in risk appetite. Should markets continue to face gloomy trading conditions, the risk-sensitive ‘Aussie’ could continue to falter against the Pound. However, a spell of cheery trade could see AUD rally.