The Pound Australian Dollar (GBP/AUD) exchange rate rose over the past seven days. The currency pair found confidence from UK Prime Minister Liz Truss’ U-turn over her poorly received mini budget. A risk-off mood also helped GBP/AUD to make gains last week.
What’s Been Happening: Pound Regains Lost Ground as BoE Extends Bond Buying
The Pound saw some volatile movement last week. Sterling actually managed to regain lost ground however amid signs of a fresh U-turn from UK PM Liz Truss.
Mixed employment data also weighed currency at the beginning of last week.
Further interventions by the Bank of England’s (BoE) into the UK bond market also lent support to GBP. Although confusion over whether or not the bank would extend its emergency bond purchases infused some volatility into the currency.
Further instability within the UK government had a mixed effect on the currency at the end of the week. The replacement of UK Chancellor Kwasi Kwarteng with Jeremey Hunt was well received by GBP investors.
On the other hand, waning confidence in PM Truss led to speculation in the markets of further political instability in the UK.
The Australian Dollar (AUD) saw mixed performance over the past week. A risk-off mood saw the ‘Aussie’ slump through the first half of the week.
A recovery in risk sentiment provided some relief to AUD exchange rates in the second half of the week, before the mood soured again on Friday.
Weekly highlights
- UK Inflation Data
September’s inflation is expected to tick higher after unexpectedly easing in August. Will the pressures of higher inflation dent confidence in the UK economy?
- Reserve Bank of Australia (RBA) Minutes
Investors will be looking for signs of the RBA’s forward policy in the latest minutes. After a below-forecast rate hike at their last meeting, will dovish signals weigh on AUD?
- UK Political Instability
With reports indicating a desire to replace Truss before the next general election, will the prospect of further instability weigh on GBP?
GBP/AUD Forecast
The Australian Dollar could see a boost on Tuesday if Chinese GDP figures rise as forecast. For the Pound, a further slump to retail sales on Friday could pull the currency lower.