The Pound Australian Dollar (GBP/AUD) exchange rate wavered last week as an upbeat market mood and resilient Australian labour market offset rate hike bets from the Bank of England (BoE).
What’s Been Happening: GBP/AUD Exchange Rate Fluctuates on Hawkish BoE
The Pound (GBP) opened the week on the front foot on a hawkish message from BoE policymaker Committee Jonathan Haskel.
Further bolstering rate hike bets, and Sterling, was hotter-than-expected labour market data. Wage growth continues to prove a sticky point as it accelerated 7.2%, the fastest rate in 20 years.
Midweek, the UK returned to growth as GDP increased by 0.2% in the month of April, after bouncing back from the 0.3% slump in March.
At the end of the week Sterling was left to trade on elevated rate hike bets. Investors turned their attention to the BoE interest rate decision.
Meanwhile, the Australian Dollar (AUD) started the week strongly amid reports of further economic stimulus in China. With their post-Covid recovery faltering, talks of Beijing cutting interest rates to spur economic growth helped support the ‘Aussie’.
Stronger-than-expected employment data also boosted the Australian Dollar as the jobless rate dropped and employment surged. Further tightening from the Reserve Bank of Australia (RBA) could be expected with a robust labour market, supporting the ‘Aussie’.
Three Things to Watch Out for This Week
- UK Interest Rate Decision
With a 25bps rate hike all but priced in, investors will be looking towards hints at further tightening from the BoE.
- UK Inflation Rate
A modest easing to 8.5% is unlikely to deviate the central bank from its aggressive tightening cycle, with the rate remaining far above the target of 2%.
- RBA Meeting Minutes
If the minutes echo the hawkish nature of the RBA’s latest rate hike, the ‘Aussie’ could climb on elevated rate hike bets.
Pound Australian Dollar Forecast
Elsewhere, the Pound could stutter as retail sales are expected to fall. Sales growth is predicted to decline by 0.2% after rising 0.5% in April.