Australian Dollar to Pound Exchange Rate Plunges on Rising Signs of BoE Hawkishness
Increasing signs that the Bank of England (BoE) is preparing to hike UK interest rates in May bolstered the Pound (GBP) during Thursday’s European session and dragged the Australian Dollar to Pound (AUD/GBP) exchange rate lower.
So far this week, a lack of Australian Dollar (AUD) support has made it easier for Sterling to advance and push AUD/GBP down from the opening level of 0.5532.
On Thursday the pair touched a low of 0.5443, its lowest levels since the 2016 Brexit vote.
The Bank of England’s (BoE) March monetary policy decision wasn’t hugely surprising, but was still enough to bolster Sterling support towards the end of the week and help it firm its recent gains against the ‘Aussie’.
The bank voted to leave monetary policy frozen as was widely expected, but two policymakers voted to hike interest rates.
This, as well as the bank’s meeting minutes revealing that the bank plans to hike UK interest rates in the coming months, has made investors even more confident that the BoE will hold an interest rate hike in May.
Australian Dollar (AUD) Exchange Rates Unappealing Following Mixed Job Stats
Thursday saw the publication of Australia’s February job market results, but the figures were mixed and not impressive enough to make the risky Australian Dollar more appealing.
Australia’s unemployment rate unexpectedly worsened from 5.5% to 5.6%, but this was due to a surprising rise in the participation rate – from 65.6% to 65.7%.
The employment change figure was forecast to improve from 16k to 20k. However, the previous figure was revised lower to 12.5k and the February figure only reached 17.5k.
With Federal Reserve news and concerns about the possibility of a US sparked ‘trade war’, risk-aversion has also kept pressure on Australian Dollar trade this week.
Pound (GBP) Exchange Rates Bolstered by Domestic Data
Sterling’s gains against the Australian Dollar were made even easier this week by the latest UK ecostats, many of which have beaten forecasts.
Wednesday saw the publication of Britain’s January job market results, which saw the unemployment rate unexpectedly improve from 4.4% to a 42 year low of 4.3%.
UK wage growth beat expectations including bonuses, rising from a revised 2.7% to 2.8% despite being forecast to advance from 2.5% to 2.6%.
Thursday followed with Britain’s February retail sales results, which also beat expectations in most prints.
Month-on-month retail sales rose from 0.1% to 0.8%, double the expected 0.4%. The yearly print edged lower from 1.6% to 1.5% rather than falling to the forecast 1.3%.
Australian Dollar to Pound (AUD/GBP) Forecast: Brexit News and UK Data in Focus
As next week will be a quiet one for Australian data, the Australian Dollar to Pound (AUD/GBP) exchange rate is more likely to be driven by UK news and data.
Most of next week’s influential UK data will be published on Thursday, including Britain’s final Q4 2017 Gross Domestic Product (GDP) results and GfK’s March UK consumer confidence report.
However, political news and Bank of England (BoE) comments could also influence Sterling throughout the week.
While large agreements were made in the past week regarding a post-Brexit transition period for Britain, disagreements persist about how the issue of the Irish border will be handled.
Pound investors are hoping that UK-EU trade negotiations will soon begin in full.
As for the Australian Dollar, next week’s most notable data will be new home sales on Tuesday and private sector credit towards the end of the week.
Shifts in risk-sentiment are most likely to influence ‘Aussie’ trade next week, especially further developments regarding the US stance on global trade and market concerns of a possible ‘trade war’.