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Pound Australian Dollar (GBP/AUD) Exchange Rate Narrows as Markets Digest BoE Forward Guidance

March 23, 2023 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Narrows as Markets Digest BoE Forward Guidance



The Pound Australian Dollar (GBP/AUD) exchange rate traded in narrow boundaries during Thursday’s session, as investors pored over the latest forward guidance from the Bank of England (BoE).

At the time of writing, GBP/AUD traded at around AU$1.8342, showing little movement from Thursday’s morning rates.

Pound (GBP) Mixed as Investors Pore Over BoE Forward Guidance



The Pound (GBP) fluctuated during Thursday’s session, as investors reacted to the Bank of England’s (BoE) forward guidance accompanying their latest interest rate decision.

Throughout the session, the Pound stayed in flux against most major peers, climbing against some while remaining in narrow boundaries against others, or even falling.

This may be because some economists believed that the BoE were shifting to a more data driven approach, with the accompanying forward guidance offering little in the way of clear, hawkish guidance or implication of future rate hikes.

Tim Graf, Managing Director at State Street Global Markets, commented: ‘Commentary that wage and inflation pressures were expected to fall sharply over the rest of the year, as well as the fact that there were no further votes for a larger, 50 basis point hike, would suggest that yesterday’s strong CPI data are being looked through and that this rate hike cycle is close to completion.’

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With the idea of a rate hike pause on the cards, it seems that any gains the Pound was able to make on Thursday were capped. However, markets did consider the prospect of a 25bps hike at the next BoE meeting, which likely underpinned Sterling during the session.

Australian Dollar (AUD) Wavers amid Shifting Market Mood



The Australian Dollar (AUD) narrowed during Thursday’s session, as a fluctuating market mood served to drive the risk sensitive ‘Aussie’s appeal.

The recent signs of strong economic recovery in China may have added extra cushioning to the ‘Aussie’, due to its nature as a Chinese proxy currency. Reports published recently have shown that air travel and airport spending is on the rise across China, as its citizens continue to take advantage of the post zero-Covid freedoms offered.

Furthermore, burgeoning stability in China’s embattled property sector may be adding further tailwinds. With Evergrand announcing a significant effort to restructure in order to prevent the company from collapsing under its debt, there are optimistic signs.

Finally, as the market mood grew sourer over the course of Thursday’s session, the ‘Aussie’ began to narrow against most of its peers, despite gains shown in some key commodities such as coal.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast:



Looking ahead for the Pound (GBP), Friday brings the release of a cluster of impactful macroeconomic data.

First, the latest retail sales data for February is due. Economists have forecast sales to have slowed from 0.5% to 0.2% on a month by month basis. If this data prints in line with forecasts, GBP could weaken due to the UK’s economic reliance on the retail sector.

Following this, the UK’s private sector indexes for March are due to be released. While the UK’s construction sector activity is forecast to remain in contractionary territory, an uptick in the service sector may bring strength to the Pound.

For the Australian Dollar (AUD), the latest private sector indexes reflecting March’s activity are due to be released overnight on Thursday. Economists have forecast that both the manufacturing and service sectors will have slowed down, but remain in growth territory.

As such, the ‘Aussie’ could gain some ground on the back of a positive reading, especially if the releases surprise to the upside.

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