Sterling Firms Despite Lull In Data

The Pound Australian Dollar (GBP/AUD) exchange rate drifted higher on Wednesday despite an absence of any UK or Australian macroeconomic data.

At the time of writing the GBP/AUD was trading at around AU$1.9004, up roughly 0.2% from Wednesday’s opening rate.

Australian Dollar (AUD) Undermined by RBA Decision

The Australian Dollar (AUD) slumped against the majority of its peers on Wednesday despite the absence of any fresh domestic data.

However, undermining the ‘Aussie’ through to Wednesday’s European session was the Reserve Bank of Australia (RBA)’s latest interest rate decision, released on Tuesday.

Although the RBA delivered a widely anticipated hold on interest rates, the central bank adopted a less hawkish tone than markets had expected, which saw the Australian Dollar weaken in overnight trade and through to Wednesday’s European session.

The less hawkish-than-expected stance saw investors speculate that the RBA could begin unwinding its monetary policy sooner than expected, which ultimately dented ‘Aussie’ sentiment.

Adam Boyton, Head of Australian Economics at ANZ, said: ‘The combination of the less hawkish than expected language in the post meeting statement and the larger than expected upward revisions to the RBA’s inflation forecasts over the next few quarters implies the hurdle to another hike could be higher than markets have been expecting. We continue to favour November for the start of the easing cycle, although the risks remain skewed toward that being delayed into 2025 and being shallower than we are forecasting.’

Further hobbling AUD exchange rates on Wednesday was a souring market mood. As an acutely risk-sensitive currency, AUD struggled to catch bids amid Wednesday’s seemingly risk-off flows.

Pound (GBP) Muted ahead of BoE Rate Decision

The Pound (GBP) traded mostly flat against the majority of its peers on Wednesday as investors likely held off placing any overly aggressive bets ahead of the Bank of England (BoE)’s upcoming interest rate decision, on Thursday.

As markets widely predict the central bank to keep interest rates on hold at 5.25% for a sixth consecutive time on Thursday, investors will cast their eye to the bank’s forward guidance and voting split.

David Morrison, Senior Market Analyst at Trade Nation, comments on the upcoming vote: ‘It seems likely that split will continue, but it will be interesting if there’s more than one vote for an immediate cut. That would be a natural step before the MPC has a majority vote for a cut.’

As markets continue to speculate over the timing of the central bank’s first interest rate cut this year, any dovish commentary could see rate cut bets diminish from September to August, which could ultimately undermine Sterling towards the end of

the week.

GBP/AUD Forecast: BoE Interest Rate Decision in the Spotlight?

Looking ahead, the primary catalyst of movement for the Pound Australian Dollar exchange rate for the remainder of this week will likely be the Bank of England’s upcoming interest rate decision, which could rock GBP exchange rates should policymakers deliver any dovish commentary.

Turning to the Australian Dollar, as domestic data will remain few and far between, the ‘Aussie’ is likely to trade in line with risk dynamics and could strengthen should markets return to upbeat trading conditions.