Pound Australian Dollar (GBP/AUD) exchange rate subdued despite renewed BoE rate cut bets

Pound Australian Dollar (GBP/AUD) exchange rate muted despite BoE interest rate cut speculation

The Pound Australian Dollar (GBP/AUD) exchange rate is treading water this morning amid mounting speculation that the Bank of England (BoE) will begin tightening its monetary policy in the summer of 2024.

At the time of writing the GBP/AUD exchange rate is trading at AU$1.9310, virtually unchanged from this morning’s opening rate.

Pound (GBP) rangebound amid renewed rate cut bets

The Pound (GBP) is trapped in a narrow range this morning amid reports that falling energy prices in the UK could lower inflation, and in turn increase the chances of a summer interest rate cut from the Bank of England (BoE).

Commentary released by ING economist, James Smith, outlines how sinking energy bills will bring headline inflation down to 1.5% by the summer, and speculates that the central bank will deliver its first rate cut in August.

Smith said:

‘UK energy prices will fall by 12% in April and it’s likely the regulator will lower the price cap again in July. That’s set to take headline inflation below 2% in April and we think it will stay below the Bank of England’s target for much – if not all – of 2024. That should help unlock a summer rate cut, if coupled with progress on services inflation and wage growth.’

Revived BoE rate cut speculation has left the Pound struggling to catch bids before the weekend amid an absence of any notable UK data.

Australian Dollar (AUD) flat amid lull in data

The Australian Dollar (AUD) is trading sideways against the majority of its peers this morning as Australian market moving data is in short supply today.

This leaves the currency to be driven by market risk dynamics, with a cautious mood limiting demand for the ‘Aussie’.

Market sentiment appears to have been undermined by renewed demand for the US Dollar (USD), amid an easing of Federal Reserve interest rate cut expectations.

The drop in AUD comes despite Australia’s latest PMI figures reporting the service sector returned to growth this month.

GBP/AUD exchange rate forecast: Australian retail sales to buoy the Australian Dollar?

Looking ahead, the absence of any notable UK and Australian data may leave the Pound Australian Dollar exchange rate to trade without a clear direction at the start of next week.

In the second half of the week, Australia’s preliminary retail sales for January will be released, on Thursday.

Sales growth is forecast to have skyrocketed, from -2.7% up to a predicted 1.7%. Should the data match expectations, this could bolster AUD exchange rates.

Similarly, UK data will also be in short supply until Friday, which will see the release of the UK’s final manufacturing PMI score.

Will confirmation that the UK manufacturing sector remained in contraction territory for over a year dent GBP exchange rates?

Sarah Ebrahem

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