GBP AUD Dips Again Ahead of BoE Rate Decision

GBP AUD Dips Again Ahead of BoE Rate Decision

The GBP AUD exchange rate was -0.33% lower as the Aussie dollar gained further from the RBA’s higher-than-expected interest rate hike. The hawkish move surprised markets and hinted at more to come from the bank. In the UK, the housing market remains supported.

The GBP to AUD traded at 1.17550 with supports heading down to 1.7200.

Australian central bank got the rate hike ‘right’

George Washington University’s Assistant Professor of Economics Steven Hamilton said he doesn’t think there was “any doubt” that the Reserve Bank was going to raise rates.

This comes after the RBA lifted the cash rate to 0.35 per cent on Tuesday.

“I think the RBA got it right, I think a 25 basis point move is about right,” Mr Hamilton told Sky News Australia. “And I think it could’ve been bigger.”

“If the Reserve Bank had seen that very high inflation number when they met last month or the month before, for sure they would’ve raised rates.”

Scott Morrison was trying to put a brave face on the rate hike ahead of the election on May 21.

“Moody Analytics have said, incorrectly, they say, the most recent hike in the cash rate has already been politicised by the Labor opposition as an indictment on the Coalition’s economic management. This is not accurate,” he said.

“May’s rate hike is in response to the Australian economy being able to increasingly stand on its own after the unprecedented support that was offered during the pandemic.”

UK mortgage borrowing hits £7bn with another house price rise

Mortgage lending rose in the UK in March to £7bn with 70,961 mortgage approvals as house prices continue to hit record highs, according to BoE data.

Net borrowing of mortgage debt increased to £7bn in March, up from £4.6bn in February, and remains above the pre-pandemic average of £4.3bn in the 12 months up to February 2020.

The BoE reports 70,961 mortgage approvals, which was down slightly from the previous month but still well above the pre-pandemic levels. Approvals for remortgaging also rose to 48,800 in March.

Adrian Lowery, analyst at investing platform Bestinvest, said that recent mortgage lending data has been extremely volatile.

“As house prices stabilise and lenders tighten their mortgage availability criteria in the coming months, the trend is likely to return closer to levels seen before the pandemic disrupted the property market in a quite unpredictable manner,” he said.

“A detail in the release reveals that the ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 14 basis points to 1.73% in March, while the rate on the outstanding stock of mortgages ticked up 2 basis points to 2.04%. Confirming that homebuyers and those remortgaging are facing higher loan rates – as well as stricter borrowing rules.”

The Bank of England takes their turn for a policy meeting today and analysts are pivoting to further action from the bank. The Federal Reserve in the US has led the way for others to get more aggressive on rate hikes.