The Pound Australian Dollar (GBP/AUD) exchange rate traded erratically last week as GBP investors were spooked by the UK’s latest inflation figures.
What’s Been Happening: Pound Australian Dollar Volatile as UK Inflation Cools
The GBP/AUD exchange rate opened the week on firm footing. The Australian Dollar (AUD) initially weakened on the back of weaker-than-expected Chinese GDP figures.
The ‘Aussie’ then faced additional selling pressure as the minutes from the Reserve Bank of Australia’s July meeting revealed the bank almost left interest rates on hold.
At the same time, the Pound (GBP) was left adrift at the start of the week in the absence of any notable UK data releases.
This changed with the release of the UK’s consumer price index on Wednesday. UK inflation was shown to have cooled more than expected last month.
Sterling plummeted as the deceleration in inflation undermined bets for another 50bps rate hike from the Bank of England (BoE).
The drop in GBP/AUD then persisted on Thursday. The pairing struck a three-week low in the wake of a strong Australian Jobs report.
However, GBP/AUD was able to recover the bulk of these losses by the end of the session, in response to upbeat UK retail sales figures and a prevailing risk-off mood.
Three Things to Watch Out for This Week
- UK PMIs
The Pound opens the week on the defensive as the UK’s latest PMIs revealed UK private sector growth slowed to a crawl this month.
- Australian Inflation Rate
In the spotlight for AUD investors will be Australia’s own CPI figures. Will another cool down in inflation in the second quarter further undermine RBA rate hike bets and pull AUD lower?
- Australian Retail Sales
The end of the week will see the publication of Australia’s latest retail sales data. An expected contraction in sales growth is also likely to reflect negatively on the ‘Aussie’.
Pound Australian Dollar Forecast
Elsewhere the Pound Australian Dollar exchange rate is also likely to be highly sensitive to market risk sentiment, which will no doubt be influenced by the Federal Reserve’s latest rate decision.