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Pound to Australian Dollar Exchange Rate near Highs as Bank of England (BoE) Outlook Approaches

Bank of England

Pound to Australian Dollar Exchange Rate Climbing despite Stronger Australian Data

Uncertainty over the tone the Bank of England (BoE) will take in today’s January policy decision, is keeping the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate steady since yesterday. Australian Dollar (AUD) weakness is making it easier for the pair to hold near highs.

Last week saw an impressive two-cent GBP/AUD surge, from 1.8934 to 1.9155.

This week’s gains haven’t been quite as steep. Still, GBP/AUD is sustaining solid gains so far.

While GBP/AUD has been unable to hold Tuesday’s monthly high of 1.9349, the pair trends relatively closely below those highs. GBP/AUD trends near 1.9300 at the time of writing.

Today’s biggest event for the Pound to Australian Dollar outlook will be the anticipated BoE decision.

Pound (GBP) Exchange Rates Steady as Markets Await Carney’s Final BoE Decision

Investors have been hesitant to move on the Pound (GBP) too much since yesterday. Earlier in the week, lingering Bank of England (BoE) interest rate cut bets combined with fresh Brexit uncertainties, knocked Sterling slightly.

The currency has seen fairly narrow movement since. This is because markets are highly anticipating the Bank of England’s January policy decision.

In what is being called a ‘knife-edge’ decision, markets are highly uncertain over the tone the bank will take in the decision.

Bets of whether or not the bank will cut UK interest rates are fairly close to 50/50. Analysts are uncertain whether the bank will be more negative or positive, in reaction to recent UK data trends.

The bank decision will take place later today.

Australian Dollar (AUD) Exchange Rate Outlook Pressured by Coronavirus Concerns

The Australian Dollar (AUD) continues to face pressure today, even as Australia’s domestic data beats analyst expectations. AUD movement has been dominated by market concerns over the coronavirus outbreak in China this week.

As the ‘Aussie’ is often used as a proxy for China sentiment, as well as being correlated to risk-sentiment, concerns that the virus could hit growth have hit the Australian Dollar particularly hard.

According to Minori Uchida, Chief Currency Analyst at MUFG Bank:

‘While it is highly uncertain how much the disease will spread and how hard it will hit the economy, downgrades to the Chinese economy look inevitable’

As China’s economy is closely linked to Australia’s, AUD investors are becoming increasingly anxious that Australia’s economy could be hit as well.

This meant that the ‘Aussie’ has not been able to benefit from this week’s stronger than expected Australian inflation stats, or today’s better than forecast export and import prices figures.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook to be Heavily Influenced by BoE

Market attention is currently heavily focused on the Bank of England (BoE). The bank will hold its January policy decision at around noon in the European session today, and the outcome of the decision could have a notable impact on the Pound outlook.

Investors are betting that a rate cut is around as likely as rates being left frozen. If the BoE cuts rates and takes a more negative stance, the Pound could slump and hopes of a UK economic rebound may soften.

On the other hand, if the bank expresses confidence in Britain’s economic outlook the Pound is likely to see further gains.

This could push GBP/AUD to new January highs. The Australian Dollar’s mixed movement on coronavirus jitters means it could be more easily driven by rivals.

Today’s BoE decision is made doubly important by the fact will be the final policy decision of Governor Mark Carney’s term as Governor.

While Bank of England news is likely to dominate markets today, the Pound to Australian Dollar (GBP/AUD) exchange rate could also be influenced if there are coronavirus developments which influence the Australian Dollar outlook.