Potential for Bank of England interest rate hikes could push the GBP/AUD rates higher

GBP AUD Pauses After a Recent Bounce Higher 

The monetary policy committee for the Bank of England yesterday chose to keep interest rates on hold, with all 9 voting members opting to keep rates on hold. The pound’s to Australian dolar rate has remained relatively unchanged after the vote but the outgoing governor of the Bank of England did highlight that there could be more rate hikes in the near term future. Since his comments, which came after the votes, we’ve seen the pound climb slightly against most major currency pairs.

UK economy performing better than expected

It was also pointed out that the despite Britain’s economy slowing since the Brexit vote which took place almost 3-years ago now, it has fared better than expected and also better than a number of other leading economies such as those within the Eurozone which are currently facing downward pressures, Germany included.

The next rate hike is expected to take place before the end of 2021, although previously the next hike was earmarked for the end of 2024 so signs of a pick up in the economy could materialise in a rate hike which could push the Pound higher.

With UK unemployment at a 44-year low and wages growing at their fastest rate in over 10 years the UK economy remains resilient. Down under in Australia however, inflation remains stubborn and the next move from the Reserve Bank of Australia is likely to be a cut so we could see the GBP/AUD rate continue to move upward providing the current trend continues.

Trade talks between the US and China have also hit an impasse recently according to reports so this is likely to have a negative impact on the Aussie dollars value, and it’s another topic for those with a AUD currency requirement to be aware of.

There are no economic updates out of the UK or Australia today, but do feel free to register your interest with us if you wish to discuss the next potential market movers coming in the month ahead. You can contact me directly using the form below.