Pound Australian Dollar Exchange Rate News: GBP/AUD Surged as RBA Claims Inflation has Peaked

March 7, 2023 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Surged as RBA Claims Inflation has Peaked

Australian Dollar (AUD) Slipped on Reduced Future Rate Hike Bets

The Australian Dollar (AUD) tumbled overnight as the Reserve Bank of Australia (RBA) delivered a dovish rate hike. Despite meeting expectations of a 25bps rate hike, and a record 10th consecutive time, the accompanying statement sapped demand.

With the cash rate now sitting at the highest rate since mid-2012, the RBA Governor Philip Lowe poured cold water on AUD investors’ moods as he implied that a pause is not far off. Shifting from a hawkish rhetoric to one more dovish, Lowe added:

‘The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.

‘In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.’

Pound (GBP) Boosted by Strong Retail Figures

Meanwhile, the Pound (GBP) struggled for demand against many of its peers on Tuesday amid a lack of economic data. However, a drastically weakening ‘Aussie’ saw the Pound climb.

The British Retail Consortium (BRC) released the latest retail sales monitor report for February. Showing a modest climb from expected figures, sales climbed 4.9% YoY, a much-improved figure from January’s 3.9% climb.

However, the underlying data causes concern for the UK economy. Despite strong sales, surging inflation ballooned the figure as sales volumes themselves fell drastically. Helen Dickinson, Chief Executive of BRC, has called for further intervention from the government to help ease the burden of soaring prices for both consumers and retailers:

‘To protect people from ongoing price rises for goods, government must avoid additional regulatory costs on business that compromise retailers’ ability to invest in lowering prices and in other areas that would contribute to the UK’s economic recovery.’

Elsewhere, Brexit concerns could be limiting gains for Sterling on Tuesday morning. UK manufacturers are worried that the frayed relationship between the UK and EU could be damaging the economy beyond Brexit. Make UK, the UK’s leading trade body, warned that EU suppliers are becoming more cautious of doing business post-Brexit.

GBP/AUD Exchange Rate Forecast: RBA Speech to Resuscitate the Aussie?

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with another speech from Lowe. But as investors are already expecting the RBA to ease its hawkish rates stance, Lowe is unlikely to go back on his word, so the ‘Aussie’ could slide further on dovish rhetoric.

Meanwhile, the Pound will be left to trade on market sentiment alone in light of economic data. With the trading calendar thin until Friday, domestic woes and Brexit issues could sap demand once again.

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TAGS: Pound Australian Dollar Forecasts