Pound Australian Dollar exchange rate rangebound following Australian consumer confidence change
The Pound Australian dollar (GBP/AUD) exchange rate is trapped in a narrow range this morning amid waning Australian consumer confidence and surmounting Bank of England (BoE) interest rate cut speculations.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9312, virtually unchanged from this morning’s opening rate.
Australian dollar (AUD) capped by consumer pessimism
The Australian dollar (AUD) is struggling to gain ground against its major peers this morning following a domestic downturn in consumer confidence.
Australia’s latest Westpac consumer confidence survey fell below expectations overnight, declining to -1.8% in March. Hitting a four-month low, consumer confidence retreated from last month’s 6.2% increase, and missed expectations of a -1.6% decline.
Matthew Hassan, a Senior Economist at Westpac cited persistently high Reserve Bank of Australia (RBA) interest rates as one of the main drivers behind the deteriorating outlook:
‘Consumers are still deeply pessimistic and becoming more concerned about the economy’s near-term outlook. Responses over the course of the survey week suggest sentiment made another sharp turnaround following the RBA decision.’
With the central bank widely expected to enact a further rate hold during its monetary policy update in May, consumer sentiment may remain bleak in the months to come.
The dismal news also serves to cast a shadow over the acutely risk-sensitive Australian dollar’s upbeat wins this morning, amid an increasing appetite for risk.
Pound (GBP) struggles amid ramped up BoE rate cut bets
The Pound (GBP) is facing headwinds this morning amid a lack of macroeconomic releases.
Ahead of the UK’s finalised GDP reading due later in the week, markets continue to price in multiple interest rate cuts for the year ahead, with a 25% implied probability that monetary loosening could occur at the BoE’s May meeting.
Economists at global advisory giant KPMG echoed BoE dove Swati Dhingra’s recent concerns that prolonged rate holds may pave the way for long term economic weakness in the UK.
KMPG noted:
‘Delaying interest rate cuts could compound the ongoing weakness in the economy.’
With Thursday’s GDP data set to confirm that a UK technical recession occurred last year, the BoE may face renewed pressures to begin its unwinding cycle in order to reinject a sense of momentum into the UK economy.
Elsewhere, news of a cooling grocery inflation further bolsters the likelihood of a May interest rate cut. With food prices at their lowest point since February 2022, easing price pressures signal the arrival of wider inflationary cooling.
Pound Australian dollar exchange rate forecast: Australian inflation to lift AUD
Going forwards, Australia’s monthly CPI indicator is due for release overnight. Economists forecast a slight warming in February’s reading from 3.4% to 3.5%. Should the data align with expectations, the ‘Aussie’ may garner some investor interest, as stubborn inflation enables further push back against RBA monetary loosening.
Australia’s latest retail data is then due for release on Thursday. With sales due to have fallen to 0.4% in February, from the previous month’s 1.1% increase, AUD could decline amid signs of dwindling consumer activity last month.
For the pound, the next notable release arrives on Thursday, with the UK’s finalised GDP figures for the fourth quarter of 2023. Economists expect to see confirmation that the UK economy contracted by 0.3% last winter. This may serve to undermine Sterling, enhancing market speculations of looming BoE rate cuts.