Pound Australian Dollar (GBP/AUD) Exchange Rate Firms on UK Inflation

The Pound Australian Dollar (GBP/AUD) exchange rate rose overall through the course of last week’s session, as the Australian Dollar (AUD) faced headwinds over central bank policy.

UK inflation data on Wednesday helped elevate the Pound (GBP) against its peers, printing better than expected at 3.2%.

What’s Been Happening: RBA Speech Subdues AUD; High UK Inflation Boosts the Pound

Risk appetite was mixed on Monday as weakness in the Pound allowed the ‘Aussie’ to exert modest gains. An optimistic Deutsche Bank survey encouraged bullish trading amidst a risk-on mood.

On Tuesday, the Pound climbed as AUD was significantly depressed by a dovish speech from the Reserve Bank of Australia (RBA)’s Governor Philip Lowe. Lowe warned about the possibility of further restrictions on activity as a result of the coronavirus.

Consumer confidence supported the Australian Dollar on Wednesday: gains were short-lived however, as UK inflation boosted the Pound. CPI printed at 3.1% – the highest figure since November 2011.

The end of the week saw the Pound Australian Dollar fluctuate as UK retail data revealed an unexpected contraction. Losses were capped by a risk-on mood and US Dollar volatility.

Three Things to Watch Out for This Week

  1. Australian PMI Data

Australian flash PMIs are expected to reveal a fall in manufacturing compared with growth in services. Mixed data could limit AUD gains.

  1. BoE Interest Rate Decision

The Bank of England (BoE) are forecast to leave interest rates at 0.1%, with no immediate change to their asset purchases. A hawkish tone could boost GBP.

  1. Covid-19 Developments

The Australian economy has suffered recently from a surge in coronavirus cases – if numbers continue to rise, the ‘Aussie’ could face further losses.

Pound Australian Dollar Forecast

Various speeches from central bank officials could affect trading sentiment this week, amongst several data releases. Updates from the BoE on Thursday are likely to be the main mover for the GBP/AUD exchange rate.

Any developments to do with coronavirus may affect movement, as public restrictions limit economic growth. Rising case numbers are also likely to deter investors.