Pound Australian Dollar Exchange Rate News: GBP/AUD Fluctuated amid UK Economic Optimism

April 17, 2023 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Fluctuated amid UK Economic Optimism

Pound (GBP) Supported by Renewed Economic Optimism

The Pound (GBP) managed to find modest support despite a lack of major economic data. Providing some modest support to Sterling is renewed optimism over the economic outlook for the UK.

Deloitte released their quarterly poll of chief financial officers across the UK and found the strongest uptick in confidence since the vaccine rollout in 2020. With energy prices tumbling, Brexit woes easing with the Windsor Framework, and allaying issues with recruitment and supply chains, companies are more upbeat over the coming year. Ian Stewart, Chief Economist at Deloitte, commented on the data:

‘The economic unpredictability that marked the beginning of 2023 has started to clear, with CFOs reporting the largest decline in perceptions of uncertainty to date. Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns and an improving inflation backdrop.’

Further propping up the Pound is a significantly upgraded economic forecast from EY ITEM club. Releasing their Spring forecast, the UK economy is expected to grow by 0.2% in 2023. Despite the modest growth, the figure is markedly higher than the 0.7% contraction that EY predicted in their Winter projection. Hywel Ball, EY’s UK chair, commented:

‘While easing, the economy’s challenges haven’t gone away overnight: inflation is still in double-digits and energy prices remain historically high.

‘However, perceptions matter and the fact the economy has been able to outperform expectations could help stir a revival in business and consumer confidence.’

However, weighing on the Pound, and potentially sapping demand, are growing expectations that the Bank of England (BoE) could be heading for a pause in the interest rates at the next policy meeting. Over half of Bloomberg economists now believe that the central bank will refrain from hiking rates again. Robert Wood, Chief UK Economist at Bank of America, said:

‘It’s pretty clear that labour market tightness is fading. Certainly, that’s good news for the Bank of England, and it does make the May decision a really close call.’

Australian Dollar (AUD) Undermined by Mixed Market Mood

Meanwhile, the Australian Dollar (AUD) struggled for much demand on Monday as a lack of economic data left it exposed to global market sentiment. Despite significantly pared interest hike bets from the Federal Reserve buoying the market mood, concerns of a slowdown in global growth dragged optimism down.

With concerns of a looming recession in the US, a persistently hawkish Fed kept investors on their toes as they tried to anticipate the next move from the central bank. The International Monetary Fund (IMF) also stoked caution as last week it predicted a slowdown in global growth amid subdued demand.

With very little economic data to go by, the ‘Aussie’ looked to remain in fluctuation in tandem with the wavering global market sentiment.

GBP/AUD Exchange Rate Forecast: RBA Meeting Minutes to Lift the Aussie?

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the release of the latest meeting minutes from the Reserve Bank of Australia (RBA). After the RBA chose to keep the cash rate unchanged at 3.6%, if the minutes offer any clue on whether the central bank would increase rates again, the ‘Aussie’ could climb.

Meanwhile, a speech from BoE Deputy Governor Jon Cunliffe could spur the Pound if he also hints at how the central bank will approach its ongoing battle with inflation. With headline CPI still far above the target rate of 2%, a hawkish tone could lift Sterling on increased rate hike expectations.

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