The Pound Australian Dollar (GBP/AUD) exchange rate dropped last week as a risk-on mood supported the Australian Dollar (AUD). A high reading for Australia’s trimmed mean inflation buoyed the ‘Aussie’, with investors raising bets of an early rate hike.
Meanwhile, the Pound (GBP) traded in a mixed range as distributive trades printed above expectations, but Rishi Sunak’s budget hit working class families hard. A reported fall in new Covid infections also buoyed Sterling.
What’s Been Happening: Aussie Firms on CPI, UK Budget Invites Mixed Review
The Australian Dollar traded up on Monday as a risk-on mood supported AUD, with China’s Evergrande meeting the deadline for its bond repayment extension.
The Pound fell, on dovish comments from the Bank of England (BoE)’s Silvana Tenreyro.
On Tuesday, Sterling rose briefly on a fall in Covid-19 infections. CBI Distributive Trades revealed a greater-than-expected increase in the UK’s retail sales balance.
Midweek, AUD took the lead as the country’s trimmed mean CPI exceeded expectations. A 2.1% rise caused speculation over when the Reserve Bank of Australia (RBA) may tighten monetary policy.
GBP/AUD subsequently levelled on mixed responses to the UK’s autumn budget.
Into Friday, the interest rate on the RBA’s three-year bonds soared – economists speculated that the yield curve control (YCC) program is soon to be axed, as the central bank bows to market pressure.
Sterling retained most of Wednesday’s overnight gains, despite BoE consumer credit printing below expectations.
Three Things to Watch Out for This Week
- RBA Interest Rate Decision
The Reserve Bank of Australia are expected to leave rates unchanged, although a hawkish tone may be struck given last week’s CPI.
- Australian Balance of Trade
AU’s trade surplus is predicted to fall for September.
- BoE Interest Rate Decision
The Bank of England is likely to leave rates unchanged on Thursday, but may discuss an interest rate hike next month or early next year.
Pound Australian Dollar Forecast
The Pound Australian Dollar exchange rate is likely to find direction on central bank decisions this week.
Australia’s balance of trade may also have an effect on the exchange rate, alongside external factors.