Pound Australian Dollar (GBP/AUD) exchange rate narrows amid risk averse trade
Article updated 16:55, 2/2/2024:
The Pound Australian Dollar (GBP/AUD) exchange rate is trading sideways this afternoon, as the market mood sours.
Following the latest US non farm payrolls data, which smashed forecasts, bearish trade has overtaken the markets. With the expectation now being that the Federal Reserve can keep interest rates unchanged for longer, investors are concerned about the global economic outlook.
As such, the GBP/AUD exchange rate is narrowing, with investors shying away from the risk sensitive pair.
At the time of writing, GBP/AUD is trading at around AU$1.9405, showing little movement from the morning’s opening rates.
Original article continues below:
Pound Australian Dollar (GBP/AUD) exchange rate slips as Australian PPI accelerates
The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning, amid rising Australian PPI.
At the time of writing, GBP/AUD is trading at around AU$1.9323, an increase of just over 0.3% from the morning’s opening rates.
Australian Dollar (AUD) supported by rising PPI
The Australian Dollar (AUD) is rising this morning, following the publication of the latest producer price index data.
In the fourth quarter of 2023, PPI accelerated to 4.1%, above the previous reading of 3.8%. This is likely to filter through to consumer prices, and is sparking bets on hawkish action from the Reserve Bank of Australia (RBA).
The Australian Bureau of Statistics (ABS) commented in its press release:
‘Final demand increased 0.9% this quarter with moderate rises across most industries. Sustained growth in construction outputs is driving the rise. High crude oil and energy prices in recent quarters are still having flow on impacts to prices in other industries.’
Additionally, analysts are beginning to expect the RBA to keep interest rates elevated for a prolonged period of time. This is serving to further lift the ‘Aussie’ as interest rate cut bets wane amongst markets.
Pound (GBP) oscillates as markets analyse BoE guidance
The Pound (GBP) is trading in a wide range this morning, as a lack of data keeps the focus on the Bank of England’s (BoE) decision.
Yesterday, the BoE kept interest rates unchanged as expected, but produced mixed guidance. While the overall statement skewed hawkish, dovish comments from BoE Governor Andrew Bailey is inducing volatility.
Bailey stated that:
‘For me, the key question has moved from: how restrictive do we need to be? to, how long do we need to maintain this position for?
‘I’m very clear that the decision and the question we face now is for how long we have to maintain this stance, and we will not maintain it any longer than we need to do to achieve the objective of inflation being at 2% on a sustained basis.’
With this in mind, investors are pricing in rate cuts beginning in Summer 2024, as inflation continues to cool in the UK.
Pound Australian Dollar exchange rate forecast: RBA decision in focus
Looking ahead to early next week for the Australian Dollar, the Reserve Bank of Australia is due to publish its latest interest rate decision on Tuesday.
With inflation decreasing more than expected, the RBA is expected to keep rates unchanged and may be more hawkish in its guidance. If this occurs, the ‘Aussie’ may strengthen against its peers amid diminishing rate cut bets.
Beforehand, the latest Australian trade data is due to print on Monday. The trade surplus is forecast to have decreased in December, which could weaken AUD by suggesting struggling trade.
For the Pound, data releases are few and far between at the start of next week. Because of this, Sterling may trade in a narrow range, though could see some support by confirmation of an expansion in the service sector.