The Pound-Australian Dollar could remain elevated if UK data keeps November BoE hike bets intact, while stronger Chinese growth may offer the Aussie some relief.
The Pound to Australian Dollar (GBP/AUD) exchange rate was catapulted to a two-month high last week, following the publication of abysmal Australian employment data.
At the time of writing, GBP/AUD was trading at AU$1.9151. Up around 1% from the start of last week’s session.
Pound to Dollar (GBP/USD): 1.33301 (+0.44%)
Australian Dollar to Dollar (AUD/USD): 0.694564 (+0.40%)
DAILY RECAP:
The Australian Dollar (AUD) initially firmed last week, with the currency benefiting from positive risk flows and the minutes from the Reserve Bank of Australia (RBA) latest policy meeting.
The minutes from the RBA’s September meeting highlighted policymakers’ concerns about persistent inflationary pressures and signalled that they are keeping the door open to further hikes in the future.
However, the subsequent release of Australia’s latest jobs report then sent AUD exchange rates reeling in the second half of the week.
Data from the Australian Bureau of Statistics (ABS) showed that the economy lost 39,300 jobs in September, and that unemployment remained at 4.7%, its highest level in almost five years.
This effectively erased any lingering hopes that the RBA might deliver another rate hike in November, triggering a major correction in the ‘Aussie’.
Trade in the Pound (GBP) was mixed through the first half of last week.
Supportive of Sterling was the International Monetary Fund’s (IMF) revised growth forecast for the UK, which was upgraded from 1% to 1.3%.
On the other hand, remarks from Bank of England (BoE) Chief Economist Huw Pill exerted pressure on GBP exchange rates as the policy hawkish pushed back on speculation the bank could deliver four interest rates over the next year.
The second half of the week then brought more concrete support for the Pound after the UK’s latest GDP figures surprised to the upside, with an unexpected expansion of growth in August reinforcing BoE rate hike bets for November as well as easing some of the pressure on Chancellor John Healey ahead of his upcoming budget.
Near-Term GBP/AUD Forecast: Busy Week for UK Data
Looking ahead, a deluge of high-impact UK economic releases could drive significant volatility in the Pound to Australian Dollar exchange rate next week.
The focus for GBP investors will likely be the UK’s final employment and inflation figures ahead of the BoE’s November rate decision.
If the data in any way diminishes expectations for a rate hike next month, it could result in Sterling relinquishing some of its recent gains.
Meanwhile, in the absence of any notable Australian data, the spotlight for AUD investors may be on China, with Australia’s largest trading partner publishing its latest GDP figures at the start of the week and potentially lifting the ‘Aussie’ if it reports that growth accelerated in the third quarter.
Our currency coverage draws on live market data, official economic releases and published bank research.
