Pound to Australian Dollar Exchange Rate Fails to Recover as AUD Trade Firms
Following last Friday’s plummet, the Pound to Australian Dollar (GBP/AUD) exchange rate briefly edged higher on Monday. However, the pair was unable to sustain much of a recovery ahead of Tuesday’s anticipated Reserve Bank of Australia (RBA) policy decision.
Last week saw GBP/AUD briefly climb from the week’s opening level of 1.8256 to a weekly high of 1.8464.
However, on Friday Sterling (GBP) was sold as Bank of England (BoE) interest rate hike bets fell, and the pair ended the week near a monthly low of 1.8169. So far this week the pair has remained close to that level.
Demand for the Australian Dollar has been firming, ahead of Tuesday’s Reserve Bank of Australia (RBA) policy decision.
This, as well as stronger demand for risk-correlated currencies, has prevented the Pound to Australian Dollar (GBP/AUD) exchange rate from recovering.
Pound (GBP) Exchange Rate Outlook Slumps as BoE Interest Rate Hike Bets Fade
Investors had previously been betting that the Bank of England (BoE) would hike UK interest rates as soon as May, and bank officials had indicated as much too.
However, recent UK data and caution from the bank’s Governor have caused bets of a May interest hike from the BoE to largely unfold.
Following disappointingly low UK inflation data a fortnight ago, last week saw the publication of Britain’s Q1 growth projections which fell short of expectations in both major prints.
UK growth was forecast to come in at 0.3% quarter-on-quarter and 1.4% year-on-year, but instead came in at just 0.1% and 1.2% respectively. This caused a sharp Pound selloff.
With Britain’s growth outlook a lot weaker than previously expected, there is doubt that Britain’s economy would be able to sustain tighter monetary policy any time soon.
Risky Australian Dollar (AUD) Benefits from Korean Peace Talks
The Australian Dollar (AUD) has been able to hold against Pound recovery attempts on Monday morning, as the latest global political news has left risky currencies a little more appealing to investors.
Over the weekend, a summit of talks between North Korea and South Korea was held.
The talks were perceived optimistically and saw both nations saying that they would soon write up a peace treaty to finally, officially end the Korean War after 65 years.
Hopes that military tensions between the isolated North Korea and other nations could lighten significantly have made investors less hesitant to buy risky currencies like AUD.
The Australian Dollar’s strength was still limited though. Monday’s Australian data was mixed, with new home sales disappointing but private sector credit beating expectations.
Pound to Australian Dollar (GBP/AUD) Forecast: Reserve Bank of Australia (RBA) in Focus
While unlikely to significantly change the Pound to Australian Dollar (GBP/AUD) exchange rate outlook, Tuesday’s Reserve Bank of Australia (RBA) policy decision could drive the Australian Dollar this week.
The bank is not expected to make any changes to monetary policy, but the tone the bank takes on its policy outlook will influence the direction of AUD trade.
If the bank is more cautious than expected on Australia’s economy and monetary policy for example, the Australian Dollar could weaken and GBP/AUD could climb.
Other data could influence GBP/AUD this week too, PMI stats from April and Australia’s March trade balance results.
UK and Australian manufacturing PMI stats will be published on Tuesday, followed by services data on Thursday.
Britain’s services report is most likely to influence the Pound outlook. However, it would take a much better-than-expected result to notably boost Bank of England (BoE) interest rate hike bets or the Pound outlook again.