The Pound Australian Dollar (GBP/AUD) strengthened over the past week. The pairing found support from hotter-than-expected UK inflation figures, although mixed PMI data capped gains for the exchange rate.
What’s Been Happening: Pound Climbs after Core Inflation Rise
The GBP/AUD exchange rate saw limited movements at the beginning of last week amid thin trading conditions.
Mixed PMI figures for the UK weighed on the Pound (GBP) on Tuesday. Services and manufacturing output printed below forecasts in May, pointing to a slowdown in the UK’s private sectors.
However, GBP was underpinned by upbeat forecasts from the International Monetary Fund (IMF). The IMF predicted that the UK would avoid a recession in 2023.
Sterling saw a boost on Wednesday after above-forecast inflation figures. April’s core inflation rose to 6.8% which prompted bets on additional policy tightening from the Bank of England (BoE).
The Australian Dollar (AUD) meanwhile came under pressure on Thursday from tumbling iron ore prices. The commodity slipped to a six-month low amid low demand in Chinese steel mills.
A worsening market mood also dampened enthusiasm for the Australian Dollar (AUD) over much of last week, which lifted the pair.
Finally, stronger-than-forecast UK retail sales data bolstered the Pound on Friday. April’s sales volumes rose by 0.5% despite persistent inflationary pressures on consumers.
Weekly highlights
- Australian Inflation
Australia’s monthly CPI indicator is expected to rise to 6.4% on Wednesday. Could fresh Reserve Bank of Australia (RBA) rate hike bets push the ‘Aussie’ higher?
- Chinese PMIs
China’s manufacturing sector is forecast to have remained in negative territory in May. Will the latest PMI figures dent confidence in AUD?
- UK PMI Final Readings
The final reading of May’s manufacturing PMI is expected to confirm a slowdown in the sector. But could an upwards revision help to soften the blow?
GBP/AUD Forecast
The Pound could find additional support from BoE rate hike bets this week. Meanwhile, the Australian Dollar could be weakened by any further downturns in the price of iron ore.