GBP/AUD Forecast: Pound Australian Dollar Exchange Rate Volatile after BoE Interest Rate Decision

March 18, 2021 – Written by John Cameron

The Pound to Australian Dollar exchange rate is volatile this afternoon after the Bank of England’s (BoE) decision to keep interest rates at 0.1%.

At the time of writing the pair are currently trading at around AU$ 1.7869, as the Australian Dollar remains steady on the back of positive employment data from Australia.

GBP/AUD Exchange Rate Mixed as BoE keep Interest Rates Unchanged

The Pound (GBP) briefly dipped this afternoon after markets digested the BoE’s decision to keep interest rates unchanged at 0.1%, the BoE was broadly upbeat in its UK economic outlook, but that monetary policy will remain loose for some time.

In a statement explaining why interest rates would be kept low the BoE said:

’The rates of Covid infections and hospitalisations have fallen markedly across the United Kingdom and the vaccination programme is proceeding at a rapid pace. Plans for the easing of restrictions on activity have been announced and envisage that restrictions could be lifted somewhat more rapidly than was assumed in the February Report.’
‘UK GDP fell by 2.9% in January. This was less weak than expected, due mainly to developments in public sector output, but still leaves GDP around 10% below its 2019 Q4 level.’

As a result of the decision the Pound Australian Dollar exchange rate dipped before regaining traction, with hopes that the BoE’s optimistic tone could push Sterling higher.

The Pound has also found support with the UK’s coronavirus vaccine rollout, as over 25 million people have now received a dose of the vaccine.

However concerns over a delay in vaccination supplies have caused Pound investors to remain cautious over whether the UK’s economy will reopen on the original dates set out by the Government.

Australian Dollar (AUD) Steady on Better-than-Expected Australian Jobs Report

The Australian Dollar (AUD) is steady this afternoon after better-than-excepted employment change data from Australia added much needed support to the currency.

According to data published by the Australian Bureau of Statistics (ABS) the number of people in employment rose to 88,700 in February beating forecasts and a steep rise from 29,500 in January.

This resulted in unemployment in the country falling 5.8% from 6.3% a new post-pandemic low.

However, following the US Federal Reserve’s latest dovish policy announcement yesterday evening, ‘Aussie’ investors have become more cautious around the risk-sensitive currency.

As the Fed chose to keep interest rates near 0% until 2023, and the recovery of the US economy remains uncertain, investors steer away from the risk-correlated Australian Dollar.

GBP/AUD Exchange Rate Outlook: Australian Retail Sales Report in Focus

Australian Dollar (AUD) investors will be keeping an eye on tomorrow’s publication of February’s Australian retail sales report.

A modest growth is expected in the report, which would be a sign of improvement in the Australian economy which could push AUD higher.

Global risk sentiment, will also continue to drive to Australian Dollar heading into the weekend, and with the US Dollar stronger as US treasury yields rise the ‘Aussie’ could suffer.

For Pound investors, tomorrow’s UK’s GfK Consumer Confidence figure for March is expected to remain in contraction which could add pressure to GBP sentiment.

However the GBP/AUD exchange rate will also be moved by any further coronavirus developments, with anymore concerns surrounding vaccine supplies in the UK limiting Sterling gains.

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TAGS: Pound Australian Dollar Forecasts