GBP AUD Exchange rates have seen excellent gains after a much more hawkish tome from the Bank of England was offered yesterday. Although interest rates were held at record lows and the split on the Monetary Policy Committee remained the same at 7-2 the consensus was that the outlook had changed sufficiently to warrant an interest rate increase in the near future.
The markets jumped on the news and have already begun to price in the prospect of a rate rise as soon as November. As things stand a rate increase in the UK is fully priced in by February with a 50% chance there will be hike in November. This is helping bring considerable support for the pound with a major jump higher and moving back towards 1.70 for GBP AUD. Those clients looking to sell Australian dollars would be wise to consider moving sooner rather than later as yesterdays developments have caused a seismic shift for sterling Aussie.
Some commentators are suggesting that the Bank of England may not actually be as keen to hike with a suggestion that the central bank may be trying to talk the currency up in light of the higher inflation levels the UK has recently stumbled upon. Any watering down of interest rate increases could see a sharp selloff of sterling so clients may wish to capitalise on the higher rates which have all of a sudden become available.
The Reserve Bank of Australia meanwhile may also be considering an interest rate hike down under. Data released yesterday showed 54,200 new jobs had been created as per the Australian Bureau of Statistics. The figures were considerably higher than expected and when considered alongside the higher inflation and booming property market there is every chance the central bank will be quietly mulling over a potential hike. Although no change is expected imminently there could be a period of dollar strength approaching in the coming months.
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