Pound Australian Dollar Exchange Rate News: GBP/AUD Plummets amid Hawkish RBA Rhetoric

November 4, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Plummets amid Hawkish RBA Rhetoric

GBP/AUD Exchange Rate Cascades Downward in Wake of RBA Statement

The Pound to Australian Dollar (GBP/AUD) exchange rate tumbled on Friday in response to the Reserve Bank of Australia’s (RBA) quarterly monetary policy statement.

At time of writing the GBP/AUD exchange rate traded at around AU$1.7506, which was roughly down 1.5% from Friday’s opening levels.

Australian Dollar (AUD) Soars as RBA Report Cheers Investors

The Australian Dollar (AUD) was up against the majority of its peers on Friday as the RBA released its quarterly statement during overnight trade.

Previously the RBA had disappointed ‘Aussie’ investors by perusing a dovish 25bps interest rate hike during their last policy meeting. However, the central bank’s latest report concluded that policymakers are open to considering restrictive hikes in the future, if data supports it.

According to the report:

‘The Board is focused on returning inflation to target and establishing a more sustainable balance of demand and supply in the Australian economy. To achieve this, the Board expects that interest rates will need to increase further. But monetary policy is not on a pre-set path. The size and timing of future interest rate increases will continue to be determined by the incoming data.’

This reassurance, coupled with an upbeat market mood, saw AUD enjoy strong tailwinds during Friday’s trade.

Pound (GBP) Falls as UK Enters Winter Recession

The Pound (GBP) was down against the majority of its peers on Friday, hindered by a lack of significant data and a deepening economic crisis.

The UK has entered recession, according to the Bank of England (BoE). This news has put the Pound under considerable pressure as investors readjust to the UK’s fresh economic woes.

Huw Pill, Chief Economist at the BoE, attempted to calm investors on Friday. During an interview with CNBC he said that the bank was trying to tame inflation with as little economic strain as possible:

‘Creating that balance, signalling that balance, that was really our key message yesterday … (The) slowdown in the economy is what we anticipate is required to contain domestic inflationary pressures to achieve our targets’.

Currently the BoE wants to reduce inflation to 2% but that was little comfort for GBP investors, with inflation currently sitting at 10.1%.

Faced with higher borrowing costs, increased food and electricity bills, and an unstable housing market, UK consumers and the Pound are in for a harsh winter.

GBP/AUD Exchange Rate Forecast: UK Recession Woes to Weigh on GBP?

Turning to early next week, the Pound Australian Dollar exchange rate will likely be influenced by UK domestic headlines.

The UK’s data calendar lacks significant releases, which means GBP investors will likely continue to focus on the worsening economic sentiment in the UK. Any news concerning the cost-of-living crisis or changes within climbing mortgage rates will cause movement in Sterling.

On Tuesday and Thursday, respectively, Pill and fellow BoE policymaker Silvana Tenreyro are due to speak. Any further comments about the UK’s bleak economic outlook could create further headwinds for the Pound.

Focusing on AUD, China is set to release their balance of trade report for October. Being a proxy currency for the Chinese economy, the ‘Aussie’ will likely be impacted by the data release. weaker trade data could dent the Australian Dollar.
Elsewhere Australia’s consumer confidence is expected to decline according to November’s report. This potentially downbeat data could hurt AUD exchange rates.

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TAGS: Pound Australian Dollar Forecasts