The GBP/AUD exchange rate surged to a fresh two-week high during last week’s session, amidst a bullish attitude towards the Pound.
What’s Been Happening: Pound Surges amidst Broad Weakness
The Pound was catapulted higher last week, climbing as much as three cents against the Australian Dollar.
This upswing in Sterling came in response to end-of-month trade flows as well as the widespread weakness of its peers.
This surge in GBP exchange rates even carried through to the end of the week’s session, in spite of Boris Johnson’s announcement that he was ‘squeezing the brakes’ on any additional lockdown easing.
At the same time, the Australian Dollar struggled to hold its ground last week, with some initial support quickly eroding as Australia’s latest CPI figures revealed the country slipped into a state of deflation in the second quarter.
The pressure on the ‘Aussie’ then mounted through the latter half of the week as spiking coronavirus cases in the state of Victoria stoked speculation over fresh lockdown measures.
Three Things to Watch Out for This Week
1. BoE Rate Decision
In the spotlight for GBP investors this week will be the Bank of England’s (BoE) latest rate decision. No policy changes are expected from the BoE this month, but will a cautious outlook from the bank weigh on the Pound?
2. UK PMIs
Also potentially influencing Sterling sentiment will be the finalised UK PMI figures from July, with the Pound likely to strengthen if they are revised higher.
3. RBA Rate Decision
For AUD investors the focus will be on the Reserve Bank of Australia’s (RBA) own rate decision. Again, no policy changes are expected this month, but analysts suggest the RBA may raise concerns over the speed of ‘Aussie’s recent appreciation, potentially undermining AUD exchange rates.
In addition to some key data releases this week, the GBP/AUD exchange rate is also likely to remain sensitive to coronavirus developments, with the Australian Dollar likely to be particularly vulnerable amidst a surge in domestic infections.