Pound To Australian Dollar Week-Ahead Forecast: BoE And RBA

The Pound-Australian Dollar could extend gains if the BoE signals further tightening, while a hawkish RBA may limit Sterling’s upside.

The Pound to Australian Dollar (GBP/AUD) exchange rate traded in a wide range last week amid the uncertainty presented by the latest UK budget.

At the time of writing, GBP/AUD was trading at AU$1.90935. Up around 0.4% from the start of last week’s session.

DAILY RECAP:

The Pound (GBP) spent the first half of last week’s session on the defensive, with GBP investors erring on the side of caution ahead of Chancellor John Healey’s inaugural Autumn Budget.

Uncertainty over the government’s tax and spending plans, coupled with concerns about its diminishing fiscal headroom, acted as the main headwind for Sterling.

However, the Pound found its footing again following Wednesday’s announcement, as the Chancellor’s relatively uneventful budget appeared to go down well with markets.

Healey’s budget appeared to strike a balance between providing targeted support to households and businesses while, most importantly, maintaining the government’s commitment to fiscal discipline.

This saw UK government borrowing costs edge lower in the second half of the week and allowed the Pound to mount a convincing recovery.

The Australian Dollar (AUD) got off to a strong start last week, initially being buoyed by hawkish commentary from Reserve Bank of Australia (RBA) policymakers Christopher Kent and Andrew Hauser.

Both voiced concerns about persistent inflationary pressures and hinted that the bank may need to do more in order to bring price pressures under control.

Coupled with robust third-quarter inflation figures, this turbocharged the ‘Aussie’ as it cemented bets for another rate hike in November.

However, the Australian Dollar then surrendered the bulk of these gains in the second half of the week as the currency fell afoul of some profit-taking in end-of-month trade.

Near-Term GBP/AUD Forecast: Hawkish BoE Rate Hike to Lift Sterling?

Turning to this week’s session, the Pound to Australian Dollar exchange rate may receive a shot in the arm as the Bank of England (BoE) delivers its latest interest rate decision.

The bank is expected to kick off a new hiking cycle with a 25-basis-point hike following its November meeting.

While this increase is largely priced in by markets, there’s potential for Sterling to appreciate further if the hike is accompanied by some hawkish forward guidance that hints at future tightening.

In the meantime, the RBA is expected to deliver its own rate hike on Tuesday, with the ‘Aussie’ poised to rise if the bank also hints that more action needs to be taken.

Our currency coverage draws on live market data, official economic releases and published bank research.