The pound Australian dollar (GBP/AUD) exchange rate continues to firm today following a hawkish interest rate hold from the Bank of England (BoE) on Thursday. Also boosting pound (GBP) morale is a better-than-expected retail release for the month of August.
At the time of writing, GBP/AUD is trading at A$1.9530, having climbed by more than 02.% in the past 24 hours.
Pound (GBP) buoyed as investors digest BoE decision
The pound holds onto most of its overnight gains today following the BoE’s decision to keep interest rates on hold.
The UK’s central bank decided yesterday to leave interest rates unchanged, as expected; lending additional support to GBP were the hawkish inclinations of all but one policymaker. Two of the Monetary Policy Committee (MPC) were expected to vote for a rate cut, but only one did so.
Into today, Sterling is further boosted by upbeat retail data. Sales in August increased by 1% rather than the 0.4% forecast, on account of warmer weather and end-of-season sales.
Matt Jeffers, Managing Director for Retail Strategy and Consulting at Accenture, observed that retailers are preparing for the ‘Golden Quarter’: the lead-up to Christmas which incorporates Halloween, Black Friday, and Cyber Monday.
He told reporters: ‘With Autumn now upon us, September will see new demands for seasonal trends in clothing and food as temperatures cool off and days shorten.’
Australian dollar (AUD) tailwinds wane despite strong employment data
The Australian dollar (AUD) weakens against its peers today despite the publication of impressive employment data on Thursday.
The Australian economy added almost double the number of jobs forecast last month, while unemployment remained unchanged. Weakness in the US dollar (USD) also helped contribute towards initial ‘Aussie’ strength.
However, AUD is now facing headwinds as a risk-off mood prevails. Although the Reserve Bank of Australia (RBA) is not expected to cut interest rates this year, other major central banks are expected to follow the example of the Federal Reserve, who enacted a 50bps rate cut midweek.
The prospect of looser monetary policy across multiple economies depresses currency traders who anticipate smaller returns on their investments, inspiring bearish behaviour.
Also capping gains for the Australian dollar is weakness in China’s economy. Multiple economists have lowered their 2024 growth forecasts, with experts at Morgan Stanley warning that ‘things could get worse before they get better.’
GBP/AUD exchange rate forecast: US dollar dynamics to drive movement?
The pound Australian dollar exchange rate could trade today upon US dollar (USD) dynamics, given the lack of significant data due for release from the UK or Australia.
Following the Fed’s interest rate cut on Wednesday, traders are speculating over the effect policymakers’ decision could have upon other central banks. As experts formulate an idea of how economies will react to pickup in interest rate cuts, risk sentiment may remain subdued.
Into next week, GBP/AUD is likely to trade according to fresh PMI data. Manufacturing activity in Australia is expected to remain in contraction territory while the sector continues to expand in the UK, albeit more slowly. If the data prints as expected, the pound could climb against the ‘Aussie’.