The Pound-Australian Dollar rate could come under pressure if the RBA delivers another rate hike, while Sterling lacks major domestic catalysts this week.
The Pound to Australian Dollar (GBP/AUD) exchange rate firmed last week after a shock rise in domestic unemployment derailed the ‘Aussie’.
At the time of writing, GBP/AUD was trading at AU$1.8845. Up around 0.2% from the start of last week’s session.
Pound to Dollar (GBP/USD): 1.324595 (+0.27%)
Australian Dollar to Dollar (AUD/USD): 0.702435 (+0.28%)
DAILY RECAP:
The Australian Dollar (AUD) put in a mixed performance last week amid shifting market sentiment and uneven domestic data.
AUD exchange rates initially firmed on the back of hawkish remarks from Reserve Bank of Australia (RBA) Governor Michelle Bullock.
Attempts by the ‘Aussie’ to strengthen in mid-week trade were then cut short by a bearish shift in risk sentiment, following the sharp appreciation of the US Dollar (USD) as stronger-than-expected US PMIs turbocharged Federal Reserve rate hike speculation.
Australia’s latest jobs data then triggered an AUD selloff in the latter half of the week after tempering investors’ more hawkish RBA expectations by reporting that unemployment unexpectedly rose to a five-year high in August.
The Pound (GBP) got off to a soft start last week as a sharp increase in UK public sector borrowing raised fresh concerns over the government’s finances.
The weaker fiscal picture added to existing pressure on Sterling, particularly with UK borrowing costs remaining elevated, raising concern about the fiscal headroom available to Chancellor John Healey ahead of next month’s Budget.
Sterling’s weakness was then compounded on Wednesday by the UK’s latest PMI figures, which suggested that momentum across the services sector slowed more sharply than anticipated in September.
However, Sterling then fared better in the latter half of the session, with the currency capitalising on some moderately hawkish remarks from a Bank of England (BoE) policymaker, which stoked expectations for a November rate hike.
Near-Term GBP/AUD Forecast: Dovish BoE to Sink Sterling?
Looking ahead, the RBA’s latest interest rate decision will undoubtedly act as the primary catalyst of movement for the Pound to Australian Dollar exchange rate this week.
Another rate hike from the RBA following its September policy meeting is likely to propel the ‘Aussie’ higher on Tuesday, particularly if the bank’s guidance also hints that more tightening may be required to bring inflation under control.
Meanwhile, in the absence of any UK macroeconomic data of note, movement in the Pound this week is likely to be driven by wider currency trends.
Our currency coverage draws on live market data, official economic releases and published bank research.
