AUD/GBP Subdued in Advance of BoE Rate Decision
After fluctuating in early trade the Australian Dollar Pound (AUD/GBP) exchange rate is currently trending lower ahead of the Bank of England’s (BoE) latest rate decision.
At the time of writing AUD/GBP is up 0.26%, having retreated close to the week’s opening levels.
Pound (GBP) Rising as Investors Await BoE Rate Decision
The Pound was largely unmoved against the Australian Dollar and the majority of its other peers at the start of the European session on Thursday as markets await the conclusion of the BoE’s first policy meeting of the year.
With the bank widely expected to leave interest rates on hold, investors will instead be looking to see if the BoE will be following other major central banks in striking a more hawkish tone this year.
To this end the UK’s better than expected growth in 2017 has some analysts forecasting that the BoE may see fit to tighten its monetary policy again this year, possibly as early as May.
Kit Juckes Global Fixed Income Strategist at Société Générale said;
‘The UK MPC meets today with the market universally expecting no change in policy, but also expecting an element of hawkishness in preparation for a hike this spring.’
‘The market prices a 50% chance of a May hike and anything which pushes those expectations back leaves GBP (the British pound) a little vulnerable.’
However with Brexit uncertainty still hanging over the economy others forecast that BoE Governor, Mark Carney may hint at a ‘wait and see’ approach to policy in 2018.
Australian Dollar (AUD) Volatile Following Chinese Trade Figures
The Australian Dollar was able to find some fleeting gains during Thursday’s trading session as it was bolstered by an astonishing surge in Chinese imports last month.
According to China’s General Administration of Customs, Chinese imports rocketed up by 36.9% year-on-year, easily beating expectations of a 9.8% rise.
With China being Australia’s single largest trading partner the surge in imports was intially welcomed by AUD investors.
However observers warned that last month’s reading may have been distorted by the timing of Lunar new year celebrations last year, leading to the ‘Aussie’ quickly falling back.
AUD/GBP UK Trade Deficit to Narrow?
Looking past the BoE’s policy meeting the AUD/GBP exchange rate may stumble again on Friday as economists forecast that the UK latest trade data will report that the trade deficit narrowed in December.
Meanwhile movement in the Australian Dollar is likely to be driven by the Reserve Bank of Australia’s (RBA) quarterly statement, with any hint that the bank may be wary of hiking rates likely to led to losses for the ‘Aussie’.