Investors Prep for Bank of England Rate Decision – What can we Expect for the Pound Australian Dollar (GBP/AUD) Exchange Rate?
The main event for the Pound Australian Dollar (GBP/AUD) today will be the June Bank of England (BoE) rate decision and the accompanying policy statement and press conference featuring Bank Governor Mark Carney.
Whilst a rate hike is almost unanimously not expected on this occasion, many analysts are hopeful that the central bank will lay the groundwork for a rate rise in August this year.
In this regard, investors will be paying close attention to the policy statement, with any hawkish tones – possibly citing the strength of the UK’s labour market – liable to send the Pound higher.
On the other hand, central banks around the world seem to have grown increasingly anxious about escalating trade tensions between superpowers, and we could find a similar attitude amongst members of the BoE’s Monetary Policy Committee (MPC) today.
If the bank does decide to remain cautious or tight-lipped then we could see GBP/AUD come under greater pressure.
Trade War Fears Limit Australian Dollar (AUD) Exchange Rate Outlook
Once again, the outlook for the ‘Aussie’ Dollar (AUD) remained beholden to the state of global trade affairs, with news that India has now hit back at the US with tariffs of their own curbing risk appetite amongst investors and hurting demand for the Australian Dollar.
India raised its import duties on a number of US exports in apparent retaliation against the US tariffs on steel and aluminium.
This move added to the global trade turmoil, with Europe’s own tariffs (set to initiate tomorrow) also upping the ante.
In other news, Reserve Bank of Australia Governor Philip Lowe had a few dovish things to say at the recent banking conference in Sintra, Portugal, claiming that global inflation may be set to remain low for an extended period of time.
This, combined with recent cautious communications from the RBA suggested that the bank is still set on maintaining a neutral stance.
Hawkish US Fed Siphons Demand from the Australian Dollar (AUD)
Another major detrimental factor in the value of the Australian Dollar (AUD) is the siphoning effect of its currently rallying US counterpart.
Investors currently favour the US Dollar (USD) for a wide variety of reasons, but the predominant cause is, of course, the hawkishness of the US Federal Reserve, with Bank Chairman Jerome Powell still pointing to 2 more rate hikes this year.
Beyond this, As China and other superpowers prepare to levy tariffs against the US, investors have flocked to the ‘Buck’, hopeful that the tariff measures will increase consumer price inflation in the and force an even more aggressive stance on monetary policy.
Compared to the current dovishness of the RBA, it seems that the US Dollar currently has very little in the form of competition.