The Pound-Australian Dollar rate could remain under pressure if UK PMIs disappoint, while stronger Australian jobs data may reinforce RBA hike expectations.
The Pound to Australian Dollar (GBP/AUD) exchange rate fell back again last week, with the bulk of these losses following the Bank of England’s (BoE) latest interest rate decision.
At the time of writing, GBP/AUD was trading at AU$1.8761. Down around 0.5% from the start of last week’s session.
Pound to Dollar (GBP/USD): 1.339468 (+0.29%)
Australian Dollar to Dollar (AUD/USD): 0.712549 (+0.15%)
DAILY RECAP:
The Pound (GBP) was muted through the first half of last week as investors responded to a mixed batch of UK economic data.
While Tuesday’s employment figures reported unemployment held steady in July, against forecasts it would rise, the data also highlighted underlying weakness in the UK labour market.
Wednesday’s consumer price index also failed to improve Sterling sentiment, as a bump in headline inflation last month was undermined as core inflation remained flat.
Sterling then faced more notable headwinds on Thursday as the Bank of England delivered its latest interest rate decision.
While the bank’s decision to leave rates on hold did not come as a surprise to investors and the BoE acknowledged growing inflation risks, GBP exchange rates still weakened as it remains one of the few major central banks not to have tightened policy yet this year.
The Pound then attempted to claw back some of its losses at the very end of the week as the UK’s latest retail sales data reported a surprise expansion in consumer spending in August.
The Australian Dollar (AUD) initially drifted lower last week, with the currency struggling to attract support as market risk appetite faltered in the face of soaring global energy prices.
Reinforcing the risk-off mood through the middle of the week was a hawkish interest rate hike by the Federal Reserve, which catapulted the US Dollar (USD) sharply higher.
However, AUD remained well positioned to rebound in the second half of the week thanks to ongoing Reserve Bank of Australia (RBA) rate hike bets, with expectations for a September hike being bolstered by hawkish remarks from RBA Governor Michelle Bullock at the end of the week.
Near-Term GBP/AUD Forecast: Dovish BoE to Sink Sterling?
Turning to this week’s session, in terms of macroeconomic data, the next catalyst of movement for the Pound to Australian Dollar exchange rate will be the publication of the UK’s latest PMIs.
September’s preliminary PMIs could pile fresh pressure on Sterling if they report a moderation of activity in the UK’s private sector at the end of the third quarter.
Meanwhile, the focus for AUD investors will be on the publication of Australia’s latest jobs report in the second half of the week.
Expect the ‘Aussie’ to strengthen if a rebound in employment growth last month further bolsters RBA rate hike bets.
Our currency coverage draws on live market data, official economic releases and published bank research.
