Pound Australian Dollar exchange rate soars amid shifting RBA interest rate bets
The Pound Australian Dollar (GBP/AUD) exchange rate is surging this morning, as markets respond to the Reserve Bank of Australia’s (RBA) supposedly dovish pivot.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9470, up approximately 0.4% from this morning’s opening rate.
Australian Dollar (AUD) plummets following RBA rate hold
The Australian Dollar is extending its losses this morning, wavering near two-week lows following a widely anticipated interest rate hold from the RBA overnight.
While the RBA kept its cash rate unchanged at 4.35%, accompanying forward guidance from senior policymakers served to further undermine ‘Aussie’ sentiment.
Economists and markets alike spotted a notable lack of bias towards further interest rate hikes, suggesting that the RBA’s focus shifts towards monetary easing as it removes previously hawkish signals.
Stephen Koukoulas, Economic Advisor at Pink Pear, is amongst those who believes that the central bank’s subtle change in wording signals that RBA interest rate cuts are closer than anticipated.
Koukoulas noted:
‘No longer did it say that it considered increasing interest rates. Rather it moved to a position where in reference to the outlook for policy it “would not rule anything in or out”.
In other words, there was, at this stage, an even risk that the next move interest rates would be down as well as up.’
Pound (GBP) mixed amid shifting BoE rate cut expectations
The Pound (GBP) is trading in a wide range against its major peers this morning ahead of this week’s high impact releases.
With the UK’s latest CPI due for release tomorrow and the Bank of England’s (BoE) latest monetary update due out on Thursday, GBP faces volatile trade amid conflicting monetary policy expectations.
While tomorrow’s data is forecast to show inflation sinking to a two-and-a-half-year low, the BoE is likely to push back against imminent interest rate cuts, leaving the base rate at a sixteen-year high of 5.25%. However, market consensus remains unclear amid lingering anticipations of a June rate cut.
Meanwhile, a lack of supporting British data will likely leave Sterling to trade without a clear direction for the remainder of the session, as economists continue to consider upcoming BoE movements.
Pound Australian Dollar exchange rate forecast: UK inflation to sink GBP?
Looking ahead, UK inflation is set for release tomorrow. The current market consensus shows expectations of a dip to 3.5% in the consumer price index (CPI) in February’s annualised figure. Should inflation fall as forecast, surpassing a two-year low and dipping notably from January’s 4%, surmounting Bank of England rate cut bets will likely see Sterling plummet.
Additionally, core inflation is also due to cool from 5.1% to 4.6%, which may serve to heighten expectations of imminent monetary loosening ahead of this week’s BoE interest rate decision.
For the Australian Pound, the Judo Bank’s preliminary PMIs for March are due out tomorrow night. Economists forecast a slowing of activity in the services sector, retreating from last month’s notable leap to 53.1, though remaining in expansion territory at an anticipated 51.5.
Meanwhile, the manufacturing index is due to report a slight uptick to 48.9, though continual slowdowns in Australian factory activity will likely sour ‘Aussie’ sentiment.