The Pound Australian Dollar (GBP/AUD) exchange rate sank at the beginning of last week on Australian Dollar (AUD) tailwinds, before rebounding on optimistic comments from the Bank of England (BoE).
What’s Been Happening: Sterling Revives on BoE Optimism
At the beginning of the week, Chinese GDP printed above expectations, lending support to the Chinese-proxy AUD.
Hawkish minutes from the Reserve Bank of Australia (RBA) further buoyed the ‘Aussie’ on Tuesday; meanwhile, the International Monetary Fund speculated that the UK would be the worst performing G7 currency in 2023, denting Pound (GBP) sentiment.
Midweek, the commodity-linked Australian Dollar retained the upper hand initially, as the reopening of factories in Shanghai promised increased demand for Australian exports – but GBP/AUD soon changed direction on rumours that China would be cutting steel production.
GBP was then boosted on comments from BoE policymaker Catherine Mann, who indicated that the central bank may hike interest rates by 50bps at its next meeting.
At the end of the week, the Pound Australian Dollar dipped once more as UK retail data disappointed. Upbeat PMI results from Australia suppressed GBP/AUD further.
Three Things to Watch Out for This Week
- AU Inflation
Australia’s CPI is forecast to hit 4.6% on Tuesday – over 1% higher than 2021’s Q1 inflation rate. If the data prints as expected, the RBA will face further pressure to tighten monetary policy, likely booting AUD.
- Gov Bailey Speech
A speech from the BoE Governor could affect Sterling trading on Thursday, providing more insight into the central bank’s outlook. If Bailey strikes a hawkish tone, GBP may rise.
- Ukraine Conflict
Sentiment appears to be improving over the Ukraine conflict as the UN secretary Anthony Blinken remarked this morning that ‘Russia is failing’ in its war aims. If Ukraine’s allies pledge further support in the fight against Russian occupation, risk appetite could improve, supporting both GBP and AUD.
Pound Australian Dollar Forecast
Another factor which may influence GBP/AUD trading is the release of data from the Confederation of British Industry (CBI). The releases are forecast to show a slowdown in growth and waning business optimism, potentially denting the Pound.