Pound Australian Dollar (GBP/AUD) exchange rate subdued after RBA rate decision
The Pound Australian Dollar (GBP/AUD) exchange rate is trapped in a narrow range this morning, following the Reserve Bank of Australia’s (RBA) first interest rate decision of 2024.
At the time of writing the GBP/AUD exchange rate is trading at AU$1.9314, virtually unchanged from this morning’s opening rate.
Australian Dollar (AUD) firms on RBA decision
The Australian Dollar (AUD) is drifting higher this morning after last night saw the Reserve Bank of Australia vote to keep interest rates at a 12-year high, of 4.35%.
The vote was widely anticipated by markets, but the surprisingly hawkish tone helped to bolster the ‘Aussie’ in overnight trade.
The RBA warned that inflation remains too high, and left the door open to potentially hike interest rates again in the future,
The bank’s policy statement read:
‘While recent data indicate that inflation is easing, it remains high…The board expects that it will be some time yet before inflation is sustainably in the target range. The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.’
However, the Australian Dollar has shed some of its gains during the first half of the European session as a downbeat market mood limits demand for the risk-sensitive ‘Aussie’.
Pound (GBP) rangebound on slowing retail sales
The Pound (GBP) is trading sideways this morning, as new data from the British Retail Consortium (BRC) reported a drop in sales volumes.
The BRC found that in January, spending only rose by 1.2%, versus the 4.2% increase seen at the same point last year.
Helen Dickinson OBE, chief executive of the British Retail Consortium, commented:
‘Easing inflation and weak consumer demand led retail sales growth to slow. While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month…Larger purchases, such as furniture, household appliances, and electricals, remained weak as the higher cost of living continued into its third year.’
The slowdown in sales growth will raise concerns over the UK’s economic trajectory at the start of 2024.
GBP/AUD exchange rate forecast: Cautious mood to weigh on the ‘Aussie’?
Looking ahead, the Pound Australian Dollar exchange rate could be primarily driven by risk appetite this week, as a lack of market moving data for the pair leaves the currencies vulnerable to inevitable shifts in market appetite.
If market sentiment remains downbeat amid concerns that US interest rates will remain higher for longer, this could cause AUD exchange rates to slide.
Otherwise, AUD investors will be focused on upcoming data from China, particularly China’s latest inflation figures. If Australia’s largest trade partner remains in a state of deflation, the ‘Aussie’ is likely to slump.
Turning at the Pound, speeches by several Bank of England (BoE) officials could drive movement.
Should they sport hawkish tone’s during their addresses, the Pound may rise against AUD.