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Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as RBA Holds Interest Rates

July 6, 2021 - Written by John Cameron

GBP/AUD Exchange Rate Dips as RBA Says it Will Taper QE Programme

The Pound Australian Dollar exchange rate fell by -0.5% today following the latest updated by the Reserve Bank of Australia (RBA). While the RBA held interest rates at a record low of 0.1% it revealed that it would taper its quantitative easing programme from September as the Australian economy steadily recovers from the Covid-19 crisis. The pairing is currently fluctuating around AU$1.82.

As a result, demand for the ‘Aussie’ has risen on growing confidence in the outlook for Australia’s economy.

Robert Carnell, Regional Head of Research, Asia-Pacific, at ING, commented on the RBA’s decision:

‘The latest statement from the Reserve Bank of Australia leaves the date of the forward guidance on the first hike in the cash rate unchanged at 2024. But it looks as if they are preparing the ground for an adjustment to this guidance and other policies to bring them more into line with Australia's strong economic fundamentals.’

Coming up later this evening, the latest Australian AiG services PMI for June could provide a further indication of the direction of the nation’s economy.

Could an improvement in the Australian services sector last month further buoy the AUD/GBP exchange rate?

Pound (GBP) Exchange Rate Falls Despite Confirmation of Easing Lockdown Measures This Month

The Pound failed to rise against the ‘Aussie’ despite Prime Minister Boris Johnson confirmed that the Government would lift remaining lockdown restrictions from July 19.

However, the new Health Secretary, Sajid Javid, has warned that Covid-19 cases could rise above 100,000.

As a result, Sterling traders have become cautious about the outlook for the UK economy, with rising case numbers potentially increasing the numbers of those hospitalised, putting the NHS under intense pressure.

In UK economic data, the latest construction PMI figure for June beat forecasts, rising from 64.2 in May to 66.3.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply, commented on the data:

‘A wave of new orders overwhelmed supply chains again this month where stock levels could not keep up with building work accelerating at the fastest rate since June 1997.

‘These malfunctions in supply chain performance may be a global issue but this doesn’t help UK builders who are ready but unable to return fully to projects which was reflected in the lowest optimism since January. This surge in activity will lose momentum while labour availability along with key materials remain elusive.’

We could see the Pound Australian Dollar exchange rate head higher this week, however, as investors are becoming more confident about the outlook for the UK as easing of lockdown measures in a couple of weeks should accelerate economic recovery.

GBP/AUD Exchange Rate Outlook: UK GDP Data in Focus

Australian Dollar (AUD) traders will look ahead to Thursday’s speech from the Reserve Bank of Australia’s (RBA) Governor Philip Lowe.

Could more bullishness from the RBA see the AUD/GBP exchange rate head higher?

Pound investors will await Friday’s release of the final UK industrial, manufacturing and GDP data for May.

The GBP/AUD exchange rate could head higher if the outlook for the British economy continues to improve.

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