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GBP/AUD Exchange Rate to Favour Pound as RBA to Maintain Dovish Stance?

Australian Dollar Currency Forecast

GBP/AUD Exchange Rate Set to Rise on Weak Aussie Sentiment?

Analysts are attributing the rise in Pound Australian Dollar (GBP/AUD) performance to a dovish outlook from Australia’s central bank, the Reserve bank of Australia (RBA).

At the time of writing, the Pound is trading at AU$1.8392, virtually unchanged from this morning’s opening rate.

Australian Dollar (AUD) Waits on RBA Forward Guidance

Philip Lowe, Governor of the Reserve Bank of Australia announced on 1 June that ‘[The Board] will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range… This is unlikely to be until 2024 at the earliest.’ While analysts at MUFG Bank note that the RBA could shift to a more hawkish policy stance tomorrow, speculator uncertainty is stifling the Australian Dollar’s (AUD) performance against the Pound.

Economists at Australia’s Commonwealth Bank have adopted a bullish stance, predicting rate hikes to be announced as soon as next year. However, this outlook is not widely shared, as the RBA’s last press release was particularly dovish. Such a dramatic change in attitude would require significant positive stimuli; by contrast, AUD trading sentiment has been dented by rising covid cases.

Australia is still in phase one of its four-step covid response plan, with only 7.1% of the population double-vaccinated. The country’s slow response is breeding concern and criticism, as prolonged border closures have limited trade and shut out the country’s valuable migrant workforce.

British Pound (GBP) Rejects Downside Pressure as Positive Data Encourages GBP Investors

The Pound is so far resisting pressure from potential market volatility, bolstered by today’s Services PMI data, which printed higher than expectations at 62.4 points. This was the second-highest reading since October 2013, reflecting a strong expansion in service sector activity in line with easing coronavirus restrictions and growing customer demand.

Confidence is undoubtedly bolstered by the UK Prime Minister’s decision to lift most covid-related restrictions on 19 July. Boris Johnson is expected to announce later today that face mask-wearing and social distancing measures are no longer necessary, along with QR code sign-ins.

Looking forward, May’s YoY GDP figures are due to be published this Friday, which could sway the market mood depending on whether they meet expectations. The consensus prediction is 25.9% growth: not quite as high as last month’s 27.6%, but enough to encourage further GBP confidence.

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