The Pound Australian Dollar (GBP/AUD) exchange rate traded erratically last week. The pairing’s initial gains were quickly erased after a dovish speech from Bank of England (BoE) Governor Andrew Bailey.
What’s Been Happening: Pound Slumps after Cautious BoE Bailey Speech
The Pound (GBP) began the previous week making steady gains. Sterling attract optimistic bets following the announcement of a new UK-EU Northern Ireland deal dubbed the ‘Windsor Framework’.
A cautious speech from BoE Governor Andrew Bailey then triggered a dramatic downturn in the Pound. Speaking on Wednesday, Bailey signalled that UK interest rates may have peaked.
On the other hand, a speech from BoE Chief Economist Huw Pill helped to stem GBP’s losses. Pill stated that the UK’s economy was performing better than expected.
The risk-sensitive Australian Dollar (AUD) initially weakened amid a souring market mood last week.
Wednesday’s above-forecast recovery in China’s private sector output bolstered AUD, before gains for the ‘Aussie’ were capped by a slowdown in fourth quarter GDP growth.
Expectations of further rate hikes from the Reserve Bank of Australia (RBA) also boosted support to AUD.
Weekly Highlights
- RBA Interest Rate Decision
With the central bank’s 25bps rate hike largely priced in, the markets will be closely watching the RBA’s forward guidance. Will the central bank signal further policy tightening?
- UK GDP
Friday’s figures are expected to indicate a 0.1% expansion in the UK’s economy in January. Could the data bolster optimism in the UK economy and push GBP higher?
- Chinese Inflation Data
Inflation in the world’s second-largest economy is set to tick higher in February if Thursday’s data prints as forecast. Will the strong performance bolster AUD?
GBP/AUD Forecast
The Pound could see a boost on Tuesday if the British Retail Consortium’s (BRC) latest retail sales figures rise as forecast. Shifts in BoE policy expectations could also prompt movement in GBP.
An expected widening of Australia’s trade surplus on Tuesday could boost AUD. The Australian Dollar could also be affected by any shifts in risk appetite.