Pound Australian Dollar (GBP/AUD) exchange rate trades narrowly as week begins
The Pound Australian Dollar (GBP/AUD) exchange rate is inching sideways today as Pound (GBP) investors await a speech from Bank of England (BoE) Governor Andrew Bailey and Australian Dollar (AUD) traders hope for an improvement in consumer confidence.
At the time of writing, GBP/AUD is trading at A$1.9342, virtually unchanged from yesterday’s midday rate.
Pound (GBP) wavers in narrow range, traders await BoE comments
The Pound is unable to trade decisively higher today, as investors await comments that could either dent the currency or trigger an uptrend.
The head of the Bank of England is due to speak at 6pm UTC and could address the uncertainty surrounding monetary policy. While the BoE has struck a hawkish tone in recent weeks, recession fears proliferate – potentially prompting a more measured address.
Analysts predict volatility for the Pound as this week brings fresh inflation data, factory figures and retail sales data. Ahead of these releases, however, is the UK’s latest employment report – which could either encourage or shake the BoE’s determination to maintain restrictive policy measures.
Unemployment in the UK is expected to have increased to 4% in December, from 3.9% the previous month; meanwhile, average earnings excluding bonuses are forecast to have grown at a slower pace of 6.0% in the last three months of 2023. If wage growth momentum has indeed slowed, rate cut bets may increase.
The latest figures from BDO, a leading accountancy and business advisory firm, shows that employment in the private sector specifically is at its lowest levels in a decade, with hiring decisions clouded by uncertain economic prospects. As the company’s employment index dropped for the seventh consecutive month to 98.77, BDO partner Kaley Crossthwaite comments:
‘We can’t be complacent. While certain pressures are starting to ease, demand hasn’t fully returned to pre-pandemic levels, and businesses will require tailored support in the months ahead.’
Australian Dollar (AUD) firms amid risk-on mood
The Australian Dollar is climbing against several peers today as bullish market sentiment supports the risk-on currency. Investors look ahead to a speech from the Reserve Bank of Australia (RBA)’s Alan Kohler and domestic consumer confidence data for further trading impetus.
US inflation data is also expected to have an impact upon currency markets, given the knock-on effect of economic indicators in the world’s largest economy. US annualised and monthly inflation readings are expected to ease to 3.0% and 0.2% respectively in January, according to tomorrow’s release.
If the data prints as expected, risk appetite is likely to increase as traders hope for imminent interest rate cuts from the Federal Reserve. Such an eventuality may be anticipated to precede lower borrowing costs across other major economies according to central banks’ monetary policy convergence.
In the meantime, the rise in Chinese New Loans may be providing support to the ‘Aussie’ given the close trading relationship between Australia and China; further Chinese data is on hold as businesses are closed to celebrate the Lunar New Year holiday.
Additionally, ongoing assumptions of a hawkish RBA are likely to lend tailwinds. The Commonwealth Bank of Australia (CBA) have forecast a reduction of 75 basis points in the benchmark interest rate for 2024 – yet the initial cut is not expected until September.
GBP/AUD forecast: central banks to influence exchange rate?
The Pound Australian Dollar exchange rate could see movement into this afternoon, as speeches from the Bank of England’s Governor Bailey and the Reserve Bank of Australia’s Alan Kohler may indicate each bank’s monetary policy outlook.
If the BoE dials down its hawkish tone, the Pound is likely to weaken. Meanwhile, the RBA could prompt gains for Australian Dollar exchange rates if policymaker Kohler extends the hawkish outlook provided last week as the Australian central bank opted to keep interest rates on hold.