The Pound-Australian Dollar rate could rebound if Australian GDP stalls, although firm RBA rate hike expectations may keep the Aussie supported.
Last week saw the Pound to Australian Dollar (GBP/AUD) exchange rate strike its worst levels since late June amid a notably hawkish uptick in Reserve Bank of Australia (RBA) interest rate hike bets.
At the time of writing, GBP/AUD was trading at AU$1.8882. Down roughly 0.8% from the start of last week’s session.
DAILY RECAP:
The Australian dollar (AUD) initially softened last week, as geopolitical uncertainty sapped market risk appetite.
Investors were rattled by fresh trade war fears as the US slapped new tariffs on Canada, as well as the threat of new US economic sanctions on Iran and the implications for US-China relations.
After only finding fleeting gains following the release of the minutes from the RBA’s August policy meeting, the ‘Aussie’ then received a shot in the arm with the publication of Australia’s latest consumer price index.
Data published by the Australian Bureau of Statistics (ABS), showed that while headline inflation cooled from 3.8% to 3.5% year-on-year in July, this was ahead of forecasts it would fall as low as 3.3%.
The hotter-than-expected CPI print turbocharged RBA rate hike bets, which in turn drove significant demand for the ‘Aussie’ through the second half of the week.
The Pound (GBP) opened last week’s session on stable footing, buoyed by a report claiming that the UK’s productivity outlook is improving faster than official figures suggest.
However, Sterling struggled to sustain this modest support, as a lull in UK economic releases left Sterling vulnerable to the movement of its peers.
Adding to the pressure on the pound were fresh cost-of-living concerns, as the news that the UK’s energy price cap would rise to a three-year high from October.
Near-Term GBP/AUD Forecast: Stalling GDP to
Looking to the week ahead, the main catalyst of movement for the Pound to Australian Dollar exchange rate will likely be the publication of Australia’s second quarter GDP figures.
Consensus estimates predict growth stalled in Q2, which could temper some of the more hawkish RBA bets and pull the ‘Aussie’ lower in mid-week trade.
Also of note to AUD investors will be Australia’s latest trade data, which may also exert pressure on AUD exchange rates if it reports a slowdown in exports in July.
Meanwhile, the UK’s data calendar looks sparse again this week, with only August’s finalised services PMI potentially offering any real impetus for Sterling, which will otherwise be likely to driven by wider currency trends.
Our currency coverage draws on live market data, official economic releases and published bank research.
