The Pound Australian Dollar (GBP/AUD) exchange rate is slipping slightly today after ending last week on a high following the Bank of England’s (BoE) decision to raise interest rates.
Meanwhile, the ‘Aussie’ has received support today after Australia announced it will open its borders to international travel for the first time in two years.
What’s Been Happening: Pound Fluctuates as BoE Raise Interest Rates
The Pound (GBP) struggled through the first part of last week as pressure increased on UK Prime Minister Boris Johnson after the report into Downing Street lockdown breaches was delayed due to an ongoing police investigation.
Fears over a cost-of-living crisis in the UK also weighed on Sterling sentiment, with surging energy bills, tax increases, and soaring inflation set to cause the worst squeeze on household incomes in 30 years.
However, the Pound received support after the BoE adopted a more hawkish tilt, while voting to raise interest rates to 0.5% from 0.25%, and unanimously voting to begin quantitative tightening.
The Australian Dollar (AUD) traded in a wide range last week, as improved market risk appetite buoyed the risk-sensitive ‘Aussie’ through the first part of the session.
However, souring market sentiment and the Reserve Bank of Australia’s (RBA) dovish monetary policy stance dented AUD, with the central bank reiterating that it will not likely raise rates for a year or more.
Three Things to Watch Out for This Week
- UK GDP Data
Forecasts point to UK economic growth of 1.1% in the fourth quarter, the same rate as July to September.
However, with a -0.5% contraction expected in December, the Pound may come under pressure due to concerns over growth at the start of 2022.
- Australian Business and Consumer Confidence
Another expected declines in business and consumer confidence data for January and February, respectively, may pressure AUD exchange rates.
- UK Political Uncertainty
Doubts over Boris Johnson’s future look set to continue as discontent appears to grow among Conservative Party MPs who may force a leadership contest through a vote of no confidence.
Pound Australian Dollar Forecast
The Pound Australian Dollar exchange rate may trade in a wide range again this week as concerns over the UK’s economic outlook grow and the possibility lingers of a leadership contest to replace the UK Prime Minister.
Meanwhile, the RBA’s divergent policy stance to other major central banks that are tightening monetary policy may weigh on AUD sentiment.