Hawkish Forecasts Drive AUD/GBP Higher
The Australian Dollar Pound (AUD/GBP) exchange rate is drifting higher at the start of this week’s session following forecasts from Commonwealth Bank.
At the time of writing AUD/GBP is up by around 0.33%, and is close to striking a one-week high.
Australian Dollar (AUD) Bolstered by Forecasts
The Australian Dollar started this week on strong footing as markets react to predictions from the Commonwealth Bank that the ‘Aussie’ is likely to strengthen in the coming months.
The forecasts are based on the belief that the US Dollar (USD) has further to fall this year, likely prompting high-yield currencies like AUD to strengthen.
Elias Haddad, Senior Currency Strategist at the bank said;
‘While the relief rally in the US dollar may have more legs in the short term, we still expect a lower USD this year.’
The expectation that USD will fall is driven by the bank’s forecasts that the Federal Reserve will not accelerate the pace of monetary tightening in 2018 past what was predicted at the end of last year.
The Pound stumbled during the European session on Monday despite the some hawkish remarks from a member of the Bank of England’s (BoE) Monetary Policy Committee (MPC).
Speaking at a panel discussing household debt in London, BoE policymaker Gertjan Vlieghe, suggested that another rate hike may be needed this year.
‘A further rise in interest rates is likely to be appropriate if all those trends continue and we are on a trajectory. It wasn’t just one hike in November and then we take a very long break.’
However, echoing the bank’s statement following its rate decision last week Vlieghe said that any monetary tightening would be dependent on the UK’s economy not being disrupted by Brexit.
AUD/GBP Forecast: Australian Business Confidence to Slide?
Looking ahead the AUD/GBP exchange rate may slide on Tuesday with the release of Australia’s latest business confidence figures.
Economists forecast that NAB’s sentiment index will have dipped from 11 to 10 in January, with the slide in confidence likely to be driven by retailer pessimism following poor sales in December.
Meanwhile GBP investors will be focused on the release of the UK’s latest Consumer Price Index (CPI) tomorrow.
The index is expected to reveal that UK inflation slipped from 3% to 2.9% in January, its lowest levels since August and possibly dent the chances of a rate hike from the BoE this year.