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Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast to Push Higher on BoE Hawkishness

Australian Dollar Currency Forecast

Brexit Jitters Fail to Weigh Down the Pound Australian Dollar (GBP/AUD) Exchange Rate 

The Pound to Australian Dollar (GBP/AUD) exchange rate continued to push higher at the start of the week, benefitting from stronger-than-expected Nationwide house price data. 

With the UK housing market demonstrating fresh signs of strength the mood towards the Pound (GBP) picked up further, in spite of the high degree of Brexit-based uncertainty that remains. 

However, GBP exchange rates look set to experience fresh volatility over the coming days as speculation over Brexit mounts ahead of the latest EU summit. 

Unless markets see signs of the UK and EU moving towards a constructive form of agreement on key issues the Pound is likely to remain biased to the downside. 

On the other hand, if there is evidence that tangible progress is on the horizon this should give the GBP/AUD exchange rate an additional boost ahead of the weekend. 

Global Trade Concerns Continue to Limit Australian Dollar (AUD) Exchange Rates 

Worries over the global trade outlook have also continued to benefit the GBP/AUD exchange rate, with commodity prices still under a significant degree of pressure. 

Demand for the commodity-correlated Australian Dollar (AUD) has naturally weakened in response to fears of a US-instigated trade war, with the Australian economy exposed to any deterioration in the global economic outlook. 

A stronger US Dollar (USD) has equally kept AUD exchange rates under pressure after an unexpectedly strong University of Michigan confidence index boosted optimism in the underlying health of the world’s largest economy. 

With the Federal Reserve looking set to raise interest rates once again at its March policy meeting the appeal of the Australian Dollar is unlikely to improve in the near term. 

However, if Thursday’s raft of Australian employment data points towards a continued tightening of the domestic labour market this could prompt the GBP/AUD exchange rate to lose some of its upward momentum. 

Hawkish BoE Commentary Forecast to Boost Pound Australian Dollar Exchange Rate 

Further volatility is forecast for the GBP/AUD exchange rate on the back of the Bank of England’s (BoE) latest policy meeting. 

While no action is anticipated at this juncture the Pound could still some significant movement in response to the general tone of policymaker commentary. 

If there appears to be a greater shift towards hawkishness within the Monetary Policy Committee (MPC) this would give investors incentive to continue piling into GBP exchange rates. 

Even though the prospect of any imminent interest rate hike is distinctly limited the Pound could find encouragement in the suggestion that the BoE is taking a more optimistic view, in spite of concerns over the potential negative impact of Brexit. 

As Viraj Patel, research analyst at ING, noted: 

‘While it may be too early for BoE officials to offer markets a clear signal of intent over a forthcoming rate hike – as they did in September 2017 – we do think the reiteration of a resilient UK economy and concerns over sticky above-target inflation will equate to sufficient enough signal to keep UK rates supported.’ 

Unless the BoE expresses fresh doubts over the outlook of the UK economy this should be enough to keep the GBP/AUD exchange rate on a stronger footing, for the time being.