GBP/AUD exchange rate ticks lower as Australian Dollar strengthens
The Pound Australian Dollar (GBP/AUD) exchange rate is weakening today following a clutch of high-profile Chinese data during the early Asian session. While unemployment in the world’s second-largest economy was shown to have increased, an upbeat retail report and climbing industrial production prompted hopes of a recovery.
At the time of writing, GBP/AUD is trading at A$1.9387, more than 0.1% below this time yesterday.
Australian Dollar (AUD) buoyed ahead of RBA decision
The Australian Dollar (AUD) is firming against the majority of its peers today, as upbeat Chinese data lends support alongside weakness in the US Dollar (USD).
Overnight, better-than-expected retail sales and industrial production readings in China inspired hopes that the Chinese economy is beginning to recover despite trading sanctions and an embattled property sector.
China’s National Bureau of Statistics (NBS) commented during a press conference in the Asian session:
‘The national economy continued to recover and turn for the better in Jan-Feb… [although a] foundation for economic recovery and growth needs to be further consolidated.’
Meanwhile, lower US treasury bond yields supported risk-off currencies during Asian trading hours. Yet gains were capped by trepidation ahead of numerous central bank decisions this week; not least the Reserve Bank of Australia’s (RBA) own interest rate announcement.
The RBA is expected to keep rates unchanged at 4.35% tomorrow, as tackling inflation remains a priority for policymakers: Governor Michele Bullock told markets last month:
‘We’re not ruling out rising interest rates’; although she also cautioned ‘we are actually not ruling one in either… We don’t have a crystal ball.’
Elsewhere, the ‘Aussie’ faces headwinds as commodity prices soften and Tropical Cyclone Megan threatens devastation in Australia’s far North, with winds and heavy rainfall forecast.
Pound (GBP) subdued amid lack of domestic data
The Pound (GBP) remains pressured as the new week opens, with a lack of UK data contributing towards weakness in GBP exchange rates. As inflation expectations decelerate, bets for a hawkish Bank of England (BoE) come under scrutiny.
Market sentiment errs on the cautious side today ahead of a flurry of central bank activity – GBP losses are compounded as Sterling investors face uncertainty over the BoE’s interest rate trajectory.
On Friday, a leading survey showed that public expectations regarding inflationary pressures over the course of this year have eased over the past three months. While the UK’s central bank maintains that price pressures across the economy remain substantial, consumer behaviour based on public expectations plays a key role in shaping monetary policy.
Markets are now weighing up the likelihood of an interest rate cut from the Bank of England as early as June, which would reduce perceived monetary policy divergence with other central banks. If the BoE fails to rule out such an occurrence on Thursday, the Pound is likely to weaken further.
Robert Wood, chief UK economist at Pantheon Macroeconomics, predicts:
‘The Bank will continue signalling rate cuts… the data since the MPC’s last meeting confirm its forecasts. That is all that is needed for the BoE to remain on course for summer rate cuts.’
GBP/AUD exchange rate forecast: RBA speculation to drive movement?
The Pound Australian Dollar exchange rate is likely to continue trading through today’s session according to AUD investors’ expectations for tomorrow’s RBA interest rate decision.
If bearish sentiment builds ahead of the event, GBP/AUD may find some support. On the other hand, growing confidence that the bank will maintain its hawkish stance could boost the ‘Aussie’, depressing the Pound Australian Dollar exchange rate further.