Bank Of English Makes Hawkish Speech Causing GBP Price To RallyFebruary 6, 2023
The trading price of the British pound has surged remarkably against the trading price of the Australian dollar. The traders were glad to see that the trading value of the GBP/AUD pair strengthened in the latest trading session.
The value of the GBP traded higher against the AUD on Monday and it happened because of the Bank of England (BoE).
The Bank of England reportedly made a hawkish speech pertaining to the country’s monetary policy. This had the investors all excited who invested heavily in the GBP.
This caused the trading price of the British fiat currency to shoot higher against the Australian fiat in the forex market.
The forex market data shows that the value of the GBP/AUD has strengthened by 0.5% in the latest trading session. At the time of writing, the pair is trading at AU$1.7499 versus the GBP.
Hawkish Speech from BoE Strengthens the GBP
In the previous week, the value of the GBP had taken a major fall against the trading price of the AUD. Throughout the past week, the value of the British currency continued plummeting against the AUD.
However, things were going to act differently as the new week began. With the initiation of the new week, the trading price of the GBP has surged significantly and it has been pushed higher against the AUD.
Due to the recent push, the GBP has managed to brush off most of the losses it had incurred in the past week.
It was Catherine Mann, the policymaker at the Bank of England, who made a very hawkish speech about the country’s economy.
High Possibility of Interest Rate Hikes
Mann sounded very determined and firm when she made the speech pertaining to the country’s economic condition.
She hinted that the country was not going to go back on its decision of hiking the interest rates. It was a hint to the traders that the country would continue hiking the interest rates to fight inflation.
According to economists, the inflation rates have reached their peak already in the United Kingdom. Their statements have suggested that the country would no longer witness any inflation rate hikes.
This means that any further interest rate hikes would be pointless for the government of the United Kingdom.
However, the Bank of England seems to have adopted a different approach to the entire matter. The central bank is adamant that it is important to get rid of the inflation rates once and for all.
The bank is determined to control the inflation rates and bring them down to nothing. To achieve this, the Bank of England may continue hiking the interest rates.
The hikes may continue to strengthen the trading price of the GBP in the forex market. This way, the GBP will outperform not just the AUD but other major currencies as well.
No Cooling of Interest Rates at 2%
It was speculated that the Bank of England may start toning down the interest rate hike as they approach the overall 2% mark.
However, the Bank of England may have something else in mind. According to Mann, it is almost impossible for the United Kingdom to make stop at 2% interest rate hikes.
They may have to go beyond the level and that would mean increasing the interest rates even more.
Follow the Same Strategy
Mann stated that she wants the Bank of England to make one-directional decisions and not take multiple paths to achieve the ultimate goal.
She strongly opposed the idea of the interest rates being increased then decreased and so on. She stated that her point of view is to keep increasing the interest rates until the situation falls into their control.
Mann added that given the current economic condition, it would be unwise and a huge mistake to stop the hikes in interest rates. They cannot restart the process as it may cause a huge dent in their policy.