Pound Australian dollar (GBP/AUD) exchange rate climbs as markets defer BoE rate cut bets
(Article updated 15:20, 29/5/2024) The pound Australian dollar (GBP/AUD) exchange rate is climbing higher this afternoon, as risk-averse trade and dialled back Bank of England (BoE) interest rate cut speculations drive movement in the currency pairing.
Markets continued to mull over the likelihood of delayed BoE monetary unwinding, as the upcoming UK election takes precedent. This saw pound (GBP) edge higher against some of its rivals, amid speculations that the central bank remains wary of inciting any potential monetary volatility ahead of July’s vote.
Kyle Chapman, FX Markets Analyst at Ballinger Group, commented:
‘Market pricing now implies only one full rate cut in the UK before the end of the year and the first move is now expected in September.’
Elsewhere, the highly risk-sensitive Australian dollar (AUD) faltered against its safer rivals, as gloomy trade permeated global markets.
Going forwards, a speech from Reserve Bank of Australia (RBA) policymaker Sarah Hunter may lend AUD some support, should the Assistant Governor strike hawkish in her address.
At the time of writing, GBP/AUD is trading at around AU$1.9217, up 0.2% from the morning’s opening levels.
Original article continues below:
Pound Australian dollar exchange wavers as Aussie inflation data falls flat
The Pound Australian dollar (GBP/AUD) exchange rate is recouping overnight losses this morning, as the latest AU inflation data falls by the wayside.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9193, virtually unchanged from this morning’s opening rate.
Australian dollar (AUD) fluctuates following warming CPI
The Australian dollar is retreating from an overnight spike this morning in the wake of some warmer-than-forecast inflation data.
Australia’s monthly CPI indicator unexpectedly rose for a second month to 3.6% in April, rather than easing to 3.4% as forecast and edging higher from the previous month’s 3.5%.
The hotter-than-anticipated CPI reading saw the ‘Aussie’ garner some investor support upon its release, as the possibility of further Reserve Bank of Australia (RBA) interest rate hikes were pulled back into view.
Stephen Walters, Chief Economist at the Business Council of Australia, said:
‘Inflation is accelerating on all main measures, not receding as had been hoped, thanks mainly to sticky services prices. Further interest rate hikes are unlikely but, after today’s upside inflation surprise, no longer can be ruled out.’
However, AUD’s gains soon levelled off as analysts and investors alike attributed the warming CPI to volatile price changes, such as those seen in fuel and food.
Pound (GBP) wavers amid data lull
The pound (GBP) is struggling to attract investor support this morning amid a lack of fresh UK data.
With macroeconomic releases in short supply, the looming spectre of Bank of England (BoE) monetary policy continues to pressure GBP exchange rates.
Following UK Prime Minister Rishi Sunak’s call for a general election in July, analysts and investors alike expect that the central bank’s efforts will seek to avoid any monetary volatility in the interim.
Nigel Green, CEO of deVere Group, is amongst those cautioning that major central banks will likely maintain restrictive policy in the months ahead. Green noted:
‘We believe that the base case for central banks’ main strategy for the rest of 2024 will be to stick with ‘higher-for-longer’ rates, unless the global economy experiences a significant downturn.’
Pound Australian dollar exchange rate forecast: RBA commentary in focus
Looking ahead, a speech from RBA Assistant Governor Sarah Hunter may drive AUD movement overnight. Following this morning’s hotter-than-forecast inflation indicator reading, any hawkish commentary from the central bank policymaker could drive the Australian dollar’s upside amid ramped up RBA rate hike bets.
Looking to the UK, an ongoing lack of data may see GBP struggle to find a clear direction in the coming days. This could see Sterling trade primarily on market risk dynamics, as well as shifting BoE interest rate cut speculations.
An upbeat market sentiment may see the less risk-sensitive Pound falter against its riskier rivals, such as the acutely risky ‘Aussie’. Alternatively, gloomy trade could see GBP edge higher against its less secure rivals.