The Pound Australian Dollar (GBP/AUD) exchange rate rose over the past week. The Bank of England’s (BoE) 25bps interest rate hike, in addition to the unstable situation in the global banking sector pushed GBP/AUD higher.
What’s Been Happening: BoE Signals Possibility of Additional Rate Hikes
Dovish minutes from the Reserve Bank of Australia (RBA) weighed on the Australian Dollar (AUD) at the beginning of last week.
Bets for a softer pace of policy tightening from the BoE limited the Pound’s (GBP) gains on Tuesday. A return of risk appetite also kept pressure on GBP/AUD.
Above-forecast UK inflation data on Wednesday saw the exchange rate leap, before a risk-on mood in the wake of the US Federal Reserve’s interest rate decision saw the pair relinquish many of those gains.
The GBP/AUD exchange rate strengthened again following the BoE’s own interest rate decision on Thursday. The central bank hinted that the 25bps rate hike may not be its last.
An unexpected jump in UK retail sales underpinned the Pound’s gains on Friday, while fresh banking sector jitters weakened the appeal of the risk-sensitive ‘Aussie’.
Weekly Highlights
- UK GDP Data
The final fourth quarter GDP reading figures are expected to confirm the UK avoided a recession. Could this buoy the Pound?
- UK BoE Bailey Speech
BoE Governor Andrew Bailey is due to deliver two speeches this week. A broadly optimistic outlook from Bailey may strengthen Sterling sentiment.
- AU Monthly CPI
Australia’s monthly consumer price index is forecast to have eased in February. Could the data give credence to the RBA’s dovish stance and weigh on AUD?
GBP/AUD Forecast
Further jitters in the European banking sector could prompt a downturn in the Pound this week. Domestic headwinds may also affect Sterling.
For the Australian Dollar, a forecast decline in retail sales on Tuesday could weigh on AUD. The risk-sensitive ‘Aussie’ could also come under pressure if risk appetite worsens.