The Pound Australian Dollar (GBP/AUD) exchange rate slipped last week. The pairing came under pressure from an above-forecast rise in Australian inflation, prompting bets on further interest rate hikes from the Reserve Bank of Australia (RBA).
What’s Been Happening: AUD Turbocharged by Inflation Release
The Australian Dollar (AUD) was bolstered last week by RBA rate hike bets. Inflation figures on Wednesday rose above forecasts, climbing to 32-year high of 7.8% in the fourth quarter of 2022.
A large-than-forecast cooldown in fourth quarter PPI figures saw gains for the ‘Aussie’ capped on Friday, however. The data prompted a pullback in RBA rate hike bets.
The Pound (GBP) fell over the past seven days. Worsening recession forecasts for the UK pulled GBP lower initially. Worse-than-expected PMI data prompted further losses in Sterling.
Bank of England (BoE) rate hike bets provided some support to the Pound over the course of the week, however.
The latest distribute trades survey on Thursday prompted an additional drop in Sterling as the data missed forecasts.
Weekly Highlights
- Chinese Private Sector Data
A raft of data from China’s private sectors could bolster the ‘Aussie’ if it improve as forecast. Will investors take the data as signs that China’s Covid wave has passed?
- BoE Interest Rate Decision
The BoE is widely forecast to hike interest rates by 50bps at their next meeting. Could recent evidence of cooling inflation prompt a softer hike and pull GBP lower?
- BoE Pill Speech
Traders will be looking for signals regarding the central bank’s forward path. Could a speech from BoE chief economist Huw Pill spark movement in GBP?
GBP/AUD Forecast
Looking ahead, in addition to the BoE interest rate decision GBP exchange rates may also be influenced by January’s finalised PMI. Will confirmation of January’s slump weigh on Sterling?
For the Australian Dollar, similarly downbeat PMI data could pull AUD lower. RBA rate hike bets could also affect the ‘Aussie’.