GBP/AUD exchange rate rises trends higher despite lack of UK stimulus
The pound Australian dollar (GBP/AUD) exchange rate is trending higher today ahead of the release of key US data. The publication of September’s Michigan consumer sentiment index could influence the wider currency market, if improving morale boosts the US dollar (USD).
At the time of writing, GBP/AUD is trading at A$1.9580, almost 0.3% higher than this time yesterday.
Pound (GBP) boosted by forecasts for large rate cut from Federal Reserve
The pound (GBP) is climbing against several peers today, as bets for a 50bps interest rate cut from the Federal Reserve proliferate. Historically, rapid policy normalisation from the US central bank boosts perceived-riskier currencies.
Forecasts of a larger Fed rate cut were strengthened yesterday by the latest US producer price index, which showed that producer inflation rose by 1.7% on an annual basis: slower than estimates of 1.8%.
Comparatively, the Bank of England (BoE) is expected to maintain a shallow policy-easing cycle: a Reuters poll shows that the UK bank may not cut interest rates at its next monetary policy meeting. Such speculation lends further support to Sterling exchange rates.
Economists at Nomura observe that the BoE’s knife-edge vote in August and subsequently healthy business surveys indicate a likely policy hold, saying ‘We see the MPC skipping this month’s meeting and cutting interest rates again only in November.’
Amid a lack of domestic data today, GBP is likely to trade upon external factors; if US consumer sentiment improves, however, a stronger ‘Greenback’ could subdue pound trading.
Australian dollar (AUD) buoyed by hawkish RBA-speak
The Australian dollar (AUD) wavers against the pound, but is managing to climb in several exchange rates as a weaker US dollar lends support.
Also buoying AUD sentiment is a hawkish commentary from the Reserve Bank of Australia (RBA). RBA Governor Michelle Bullock said last week that it is too early to consider cutting interest rates, as domestic inflation remains too high.
Bullock told markets that Australians should not expect a rate cut in the near term, adding ‘Our experience of how costly inflation can be is the reason that getting inflation back to the target range is our priority.’
Governor Bullock’s comments received criticism from former Reserve Bank of Australia Governor Bernie Fraser, who remarked that the bank was overly focused on inflation at the expense of the jobs market. Nevertheless, the RBA’s hawkish approach remains AUD-positive.
A clutch of Chinese data over the weekend may influence Australian dollar exchange rates, given the close trading relationship between Australia and China.
GBP/AUD exchange rate forecast: pound to fluctuate ahead of BoE decision?
The pound Australian dollar exchange rate could trade in a mixed range over the weekend and into next week.
In the early hours of Saturday morning, China’s industrial production reading for August is forecast to print at 4.8% – a slower pace of growth than July’s 5.1%. If sales growth also moderates lower as expected, signs of a struggling Chinese economy could weigh upon the Australian dollar.
Subsequently, unchanged headline inflation in the UK could reinforce the Bank of England’s hawkish outlook. Ahead of Thursday’s BoE interest rate decision, traders may be hesitant of placing bullish bets, however; Wednesday’s monetary policy announcement from the Fed is also likely to divert attention elsewhere.