Pound Australian Dollar Exchange Rate News: GBP/AUD Wavered on Dovish RBA Warning of Rate Hike Pauses

March 8, 2023 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Wavered on Dovish RBA Warning of Rate Hike Pauses

Australian Dollar (AUD) Softened on Dovish RBA Rate Hike Expectations

The Australian Dollar (AUD) struggled for demand on Wednesday as the Reserve Bank of Australia (RBA) conceded that it was now closer to pausing its aggressive cycle of interest rate increases.

In a speech in Sydney, RBA Governor Philip Lowe poured cold water on any hopes of further aggressive rate hikes from the central bank. Despite saying that further tightening could still tame inflation, Lowe did point out the long lags in monetary policy, and the impact it has had on Australian households. Lowe said:

‘We also discussed that, with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy.

‘At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook.’

Pound (GBP) Undermined by Cooling Labour Market Fears

Meanwhile, the Pound (GBP) failed to muster up much strength amid a lack of economic data. A wavering market sentiment, much in part down to the aggressive turn from the Federal Reserve, could be impacting Sterling.

News of the UK labour market cooling could also be sapping demand. A survey from the Recruitment and Employment Confederation and KPMG revealed that pay growth has slowed, and permanent job placements had dropped for the fifth consecutive month. Victoria Scholar, Head of Investment at Interactive Investor, said of the survey:

‘The figure highlights the cautiousness among businesses to hire permanent staff amid the macroeconomic headwinds of slowing growth, a softening consumer, rising interest rates, and inflated costs.’

However, providing some support for Sterling, is the news that the longest-running industrial dispute could be close to being resolved. RMT have announced that planned industrial action has been suspended as a new pay offer has been presented from Network Rail. An RMT spokesperson commented:

‘The RMT national executive committee has taken the decision to suspend all industrial action on Network Rail following receipt of a new offer from the employer.

‘Further updates will be given on all aspects of the national rail dispute in the coming days.’

GBP/AUD Exchange Rate Forecast: Chinese Inflation to Influence the Aussie?

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the release of the latest inflation data for the world’s second largest economy. An expected softening of headline CPI in China could impact the ‘Aussie’.

Elsewhere, the Pound will be left to trade on market sentiment. Without major economic data not due until Friday, Sterling could slip on domestic vulnerabilities in the meantime.

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TAGS: Pound Australian Dollar Forecasts