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Pound Euro (GBP/AUD) Exchange Rate Forecast: Will Carney Urge Further Caution as UK GDP Plummets?

Bank of England

GBP/AUD Exchange rate Nosedives as UK GDP Falls Even Lower than Forecast

The Pound Australian Dollar (GBP/AUD) exchange rate plummeted on Friday morning as the UK’s latest GDP figures printed even lower-than-expected.

At the time of writing the GBP/AUD exchange rate has fallen 0.5% with the pairing largely erasing all of this week’s gains.

Sterling (GBP) Exchange Rate in Freefall as UK Economy Shows Minimal Growth

The Pound (GBP) exchange rate is in a tailspin today as markets react to some abysmal GDP figures from the UK.

According to data published by the Office for National Statistics (ONS) the UK economy grew just 0.1% in the first quarter of 2018, down from 0.4% in the previous quarter and significantly lower that the modest slide to 0.3% that had been forecast.

This was the slowest pace of growth since Q4 2012, with the main drag on growth appearing to be the construction sector as it contracted 3.3% at the start of 2018.

The disappointing figures are likely to further dampen hopes that the Bank of England (BoE) will be willing to committee to raising interest rates next month.

Australian Dollar (AUD) Exchange Rate: RBA to Leave Rates on Hold Until 2020?

Meanwhile the Australian Dollar (AUD) is facing pressure following forecasts that the Reserve Bank of Australia (RBA) will leave interest rates on hold until at least 2020.

While the majority of analysts predict that the RBA is likely to target a rate hike sometime next year, Shane Oliver, Chief Economist at AMP Capital suggest that this may be too optimistic.

‘We had been expecting the RBA to start raising rates in early 2019 but with growth likely to remain below 3% and inflation around 2% for longer we now don’t see an RBA tightening until sometime in 2020.’

GBP/AUD Exchange Rate Forecast: Carney Speech Could Spell Doom For May Rate Hike

Looking ahead the GBP/AUD exchange rate may extend its losses later today following a speech by BoE Governor Mark Carney this afternoon.

Carney prompted a major sell-off of the Pound last week as he signalled that the BoE may seek to delay is next rate hike, slashing market odds that the bank was gearing up to hike rates next month.

Given today’s lacklustre UK GDP figures, markets are bracing for a similar message from Carney today, with Sterling likely to plummet if is appears a May rate hike is now off the table.

Meanwhile looking to next week the focus for AUD investors will undoubtedly be on the RBA’s latest rate decision, with the Australian Dollar set to tumble if the bank continues to strike a dovish tone.