Pound Australian Dollar (GBP/AUD) exchange rate ticks down following Bullock speech
The Pound Australian Dollar (GBP/AUD) exchange rate is trending lower this morning following an uptick yesterday afternoon amid hawkish comments from the Bank of England’s (BoE) Catherine Mann. Today, bold rhetoric from Reserve Bank of Australia (RBA) supports the Australian Dollar (AUD).
At the time of writing, GBP/AUD is trading at A$1.9385, marginally lower than this time yesterday.
Australian Dollar (AUD) buoyed by RBA rhetoric
The Australian Dollar is climbing against several peers this morning following moderate weakness yesterday, potentially boosted by comments made by the RBA’s Michele Bullock.
The Governor of the Reserve Bank of Australia spoke in Parliament on Thursday and reiterated the message that bringing inflation down is the bank’s priority.
‘Recent developments in inflation are encouraging,’ Bullock told her audience, ‘[but] we have some way to go to meet our inflation target.
At this stage, the board hasn’t ruled out a further increase in interest rates but neither has it ruled it in.’
Capping gains for the ‘Aussie’ is strength in the US Dollar (USD), as well as dwindling prices for the country’s main exports. An increase in US Treasury Yields yesterday inspired a surge of support for the safe haven ‘Greenback’, consequently sapping demand for its risk-on rivals.
The value of coal and iron ore, meanwhile, has dropped: excessive supplies of coal amid rampant production in China drives prices lower despite high demand ahead of the Lunar New Year holiday. Demand for iron ore is dropping, on the other hand, as hopes of a recovery in China’s steel-heavy construction sector fade.
Pound (GBP) trade limited by lack of domestic data
The Pound (GBP) is trading narrowly against its peers this morning as a lack of UK data leaves the currency exposed to external pressures. Sterling enjoys some lingering support, however, following hawkish comments made yesterday by the Bank of England’s Catherine Mann.
The Monetary Policy Committee (MPC) member told her audience she was not convinced that a near-term deceleration in headline inflation will persist, citing events in the Red Sea which affect commodity prices in unpredictable ways.
Addressing the Official Monetary and Financial Institutions Forum (OMFIF), she disclosed:
‘I worry that such an upward inflation shock coming on the heels of the recent high inflation environment will be more swiftly incorporated into firms’ costs and prices, exacerbating upside momentum.’
Mann’s comments imply that now is not the time to incorporate monetary policy loosening into the Bank of England’s near-term outlook. Her sentiment is not shared across the board, however, as Chief Economist Huw Pill and Deputy Governor Sarah Breeden appear keen to bring interest rates lower.
Elsewhere, Pound investors may be considering next week’s employment and inflation releases as likely trading impetus. If UK wage growth prints as expected, indicating resilience in the UK economy, rate cut bets may recede.
GBP/AUD exchange rate forecast: jobs data in focus
The Pound Australian Dollar exchange rate is likely to trade according to a range of trading stimuli next week, including Australian confidence data, employment reports from both the UK and Australia, UK inflation; UK GDP and UK retail sales.
In the first half of the week, Australian consumer confidence is expected to have increased, though remaining in negative figures. AUD/GBP may enjoy a small uptick if the data prints as expected; although losses could be recouped on Tuesday if average UK earnings data prints at 7.0%.
On the other hand, an increase in UK unemployment may limit Sterling tailwinds. Midweek, an estimated increase in inflation is likely to trigger expectations of a hawkish Bank of England, pushing back against the emerging rate cut narrative. However, indications of further price rises are also likely to inspire concern over living cost implications.
On Thursday, the AU economy is expected to have added 30K jobs to the economy, potentially boosting the ‘Aussie’; as in the UK, however, unemployment is forecast to have increased. In the UK, flatlining economic growth may suppress GBP momentum, although recorded growth in retail sales on Friday may boost the currency once more.