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Pound Australian Dollar (GBP/AUD) Exchange Rate to Fall Further on RBA Tailwinds?

Australian Dollar (AUD) bank notes

GBP/AUD Exchange Rate to Extend Downturn?

The Pound Australian Dollar (GBP/AUD) exchange rate has slumped through today’s session, as a larger-than-expected interest rate hike from the Reserve Bank of Australia (RBA) bolstered the Australian Dollar (AUD).

At the time of writing, GBP/AUD is trading at A$1.7619, down 0.6% from today’s opening levels.

Australian Dollar (AUD) to Continue Trading Up?

The Australian Dollar has enjoyed support against its peers today as a hawkish move from the RBA buoyed investor sentiment. The central bank hiked interest rates by 25bps this morning rather than the 15bps forecast in an attempt to tame surging prices.

The central bank said the economy had proven to be resilient while inflationary pressures accelerate, and there is also evidence that wage growth is picking up. The central forecast is for Australia’s GDP to grow by 4.25% in 2022 and 2% in 2023, it added.

Furthermore, RBA Governor Philip Lowe commented that ‘[The Board] would not reinvest the proceeds of maturing government bonds, [meaning] that its bond holdings and balance sheet will decline as bonds mature…

This contraction of [the] balance sheet will contribute to some tightening of financial conditions in Australia and so assist with the return of inflation to target.’

Given the upbeat tone of today’s monetary policy statement, the ‘Aussie’ could continue to enjoy upside tomorrow, alongside the publication of the RBA chart pack.

Further supporting the currency, Australian retail sales are expected to have climbed by 0.5% in March 2022. If tomorrow’s data confirms this, the Pound Australian Dollar may drop lower still.

Pound (GBP) to Find Support on Consumer Credit?

The Pound (GBP) firmed today against several rival currencies, as an improving market mood supported the risk-on currency.

Also bolstering GBP was a jump in long-term UK yields and positive sentiment in Europe following last week’s concern that various countries may be forced to pay for Russian energy in Roubles (RUB).

In a major shift, Germany said it was prepared to back an immediate EU embargo on Russian oil. German economy minister Robert Habeck met EU colleagues in Brussels yesterday, announcing ‘We have managed to reach a situation where Germany is able to bear an oil embargo… This means it won’t be without consequences.’

Looking ahead, Sterling may find support via tomorrow’s consumer credit data. Borrowing is expected to have increased by £1.3bn in March, suggesting an increase in spending – although inflation may be responsible in this instance.

Another possible future driver of GBP trading is local election results: if the Conservative party lose as many as 500 seats, as is forecast by a poll for Electoral Calculus, political volatility could inspire Sterling losses on fears of economic repercussions.