The Pound Australian Dollar (GBP/AUD) exchange rate climbed over the past week. The currency pair saw a boost amid market confidence in newly appointed UK Prime Minister Rishi Sunak. Poor Chinese manufacturing data also bolstered GBP/AUD.
What’s Been Happening: Pound Rallies but Gains Limited by Bets on Cautious BoE Rate Hike
The Pound (GBP) made steady gains over the past seven days. Rishi Sunak’s premiership continued to restore some confidence in Sterling.
Sterling faced some resistance in mid-week trade as investors began to pare back bets on an aggressive interest rate hike from the Bank of England (BoE). Following the delay of the UK’s autumn budget until 7 November, markets became concerned that the BoE would act cautiously without any solid policy information.
However GBP exchange rates then firmed again at the end of the week, bolstered by an increasingly optimistic outlook for the UK economy.
The Australian Dollar (AUD) was underpinned by a risk-on mood through the first half of the week. Above-forecast inflation figures on Tuesday helped boost bets on interest hikes from the Reserve Bank of Australia (RBA), aiding the ‘Aussie’s ascent.
AUD saw many of its gains trimmed on Friday after poor Chinese manufacturing data, however.
Weekly highlights
- BoE Interest Rate Decision
The BoE is expected to hike rates by 75bps this week. Markets have been recently betting on a below-forecast rate hike due to uncertain UK fiscal policy. Will the BoE disappoint with a cautious decision?
- RBA Interest Rate Decision
The RBA is forecast to raise interest rates by 25bps on Tuesday. Recent above-forecast inflation figures have seen bets on more aggressive action. Could a surprisingly larger rate hike boost the ‘Aussie’?
- Australian Trade Data
Also of note to AUD investors will be Australia’s latest trade figures, with a widening of the nation’s trade surplus potentially bolstering AUD exchange rates.
GBP/AUD Forecast
Fresh turmoil in the UK government could dent confidence in the Pound this week as the controversy surrounding Home Secretary Suella Braverman begins to undermine confidence in Sunak.
Expected downturns across China’s private sectors could pull AUD lower this week if figures print as forecast.