Pound Australian Dollar Exchange Rate News: GBP/AUD Plunges to Four-Year Low

April 5, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Plunges to Four-Year Low

The Australian Dollar (AUD) Buoyed by Hawkish Rhetoric from RBA

The Australian Dollar (AUD) is seeing a huge upswing against the Pound this morning the GBP/AUD exchange rate dropped to a four-year low.

The surge in the ‘Aussie’ comes as the Reserve Bank of Australia (RBA) delivered its latest interest rate decision today, leaving rates unchanged at a record low 0.1% for the sixteenth month in a row.

Despite opting to leave its monetary policy untouched this month, aa change in the central bank’s policy outlook spurred the Australian Dollar higher Claims that the Australian economy remains resilient in the face of Covid, and that spending is picking up, the RBA also abandoned its omitted it suggestion it would remain ‘patient’ in regards to future monetary tightening.

But economists at ING warn that RBA’s approach appears too hawkish, potentially capping the tailwinds in the near future:

’The RBA clearly reiterated that it would wait for more indications that wage growth has significantly picked before moving to tighten policy. That puts the potential date for the first hike at the June meeting, as the May meeting is scheduled around two weeks before first quarter wage data is released in Australia.”

It appears that the market’s pricing on RBA tightening has gone too far (seven hikes by year-end), and we, therefore, expect some dovish disappointment along the way to curb AUD upside by year-end.’

Pound (GBP) Struggles in the Aftermath of Hawkish RBA Speech Despite Strong Data

The Pound (GBP) is slipping today, falling to its lowest levels against the Australian Dollar since November 2017. Despite the UK service PMI comfortably printing above forecast, it wasn’t enough to curb the tailwinds of the Aussie.

With the finalised S&P UK Services PMI coming in at 62.6 over the 61 expected, easily surpassing February’s figure of 60.5. The services sector saw a rate of expansion in the month of March unseen since May 1997, mainly due to workers returning to offices and an increase in travel, leisure, and entertainment spending.

The darkening cloud of inflationary pressures are on the horizon however, set to curb any further market expansion.

Mounting tensions in Ukraine also hamper the Pound against the Australian Dollar as Ukrainian President Volodymyr Zelenskyy announced on Ukrainian television that the possibility of meeting face to face with Russia’s President Vladimir Putin looks unlikely, in light of the atrocities that have emerged from Bucha at the weekend.

As Zelenskyy prepares to address the UN, he has since warned that the massacre at Bucha is not an isolated incident, and that many more atrocities in other areas of Ukraine will soon see the light of day:

’And (Bucha) is only one town. One of many Ukrainian communities which the Russian forces managed to capture. Now, there is information that in Borodyanka and some other liberated Ukrainian towns, the number of casualties of the occupiers may be even much higher.’

GBP/AUD Exchange Rate Forecast: Further Australian Data to Retain Upside against Sterling?

Looking ahead, the Pound Australian Dollar (GBP/AUD) could see further movement with the release of the Australian Performance Service Index and the Balance of Trade data due out Wednesday and Thursday respectively.

Another strong trade surplus could help the Australian Dollar to consolidate its gains in the second half of the week.

As for the Pound, data is thin on the ground this week, leaving tensions in Ukraine the biggest focus. If peace talks remain a distant possibility, the GBP/AUD exchange rate could see further fluctuations with the ongoing energy crisis seeing oil prices surging, favouring the commodity-linked Aussie.

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TAGS: Pound Australian Dollar Forecasts