The Pound Australian Dollar (GBP/AUD) rose to its highest point since February 2023 over the past week, before shedding its gains. The pairing was initially boosted by Bank of England (BoE) interest rate expectations. Before Chinese PMIs and increased Reserve Bank of Australia (RBA) rate hike bets reversed these gains.
What’s Been Happening: Australian Dollar Recovers after Upbeat Chinese PMI
The Pound (GBP) initially soared last week amid bets on additional interest rate hikes from the BoE. Following hotter-than-expected inflation data the previous week, markets priced in up to 100bp worth of rate hikes by the end of 2023.
Wednesday’s mixed data lent little support to the Australian Dollar. Whilst inflation in April rose by more than forecast, the latest manufacturing PMIs from China pointed to a contraction in the sector. Signs of a possible slowdown in the Chinese economy weighed on the ‘Aussie’.
As the week went on, a sparse data calendar saw the Pound struggle to sustain its gains. The currency began to edge lower as Sterling entered overbought conditions.
The Australian Dollar (AUD) regained lost ground on Thursday after China’s May manufacturing PMI unexpectedly printed in positive territory.
Fresh RBA rate hike bets also lifted AUD. The shift in sentiment came after the Australian government announced it would be lifting the country’s minimum wage.
Weekly highlights
- RBA Interest Rate Decision
The RBA is expected to leave rates on hold on Tuesday, although recent data has pointed to sticky inflation. Could the RBA surprise markets with a shock rate hike?
- Australian GDP
Wednesday’s figures are forecast to show continued growth in the Australian economy. Could the upbeat data push AUD higher?
- BoE Rate Speculation
With little significant data this week, will GBP find support from bets on further BoE policy tightening?
GBP/AUD Forecast
Elsewhere, the Australian Dollar could see movement off the back Chinese trade figures on Wednesday. Another slump in imports could weaken AUD sentiment.