The Pound Australian Dollar (GBP/AUD) exchange rate made strong gains last week. The pairing was bolstered by renewed bets on interest rate hikes from the Bank of England (BoE) along with underwhelming Australian labour data.
What’s Been Happening: Surprise Rise in UK Wage Growth Boosts Pound
The Pound (GBP) was boosted over the course of last week. Above-forecast wage growth data during Tuesday’s session added to bets on a 50bps rate hike from the BoE and boosted GBP.
The latest UK inflation data added to speculation of further rate hikes from the central bank. Whilst headline inflation slipped to 10.5%, core inflation remained stubbornly high.
On Friday, an unexpected fall in December’s retail sales prevented Sterling from climbing higher.
The Australian Dollar (AUD) weakened over the past seven days. Poor GDP growth figures for China pulled the ‘Aussie’ lower on Tuesday.
Signs of a cooling labour market on Thursday deepened losses for the Australian Dollar. Employment change missed forecasts to decline by 14,600. The data prompted markets to pare back their bets on further Reserve Bank of Australia (RBA) rate hikes.
Weekly Highlights
- Australian Business Confidence
November’s business confidence was the first negative reading of the index since December 2021. Last month’s figures are expected to show a recovery on Tuesday. Could the data support AUD?
- UK PMIs
The latest output data for the UK’s private sector is expected to point to a continued contraction on Tuesday. Will a negative reading for the UK’s crucial services sector pull GBP lower?
- Australian Inflation
Following a pullback in RBA rate hike bets last week, Wednesday’s fourth-quarter inflation figures are forecast to tick higher. Could the data strengthen RBA rate hike bets and bolster AUD?
GBP/AUD Forecast
For the Pound, a forest drop in the Confederation of British Industry’s (CBI) measures of health for the UK’s manufacturing and retail sectors could pull GBP lower this week.
The Australian Dollar may be affected by reports of any further Chinese Covid surges over the coming week.