The Pound Australian Dollar (GBP/AUD) exchange rate rallied through last week after GBP investors welcomed some surprisingly upbeat UK GDP figures.
What’s Been Happening: GBP/AUD Exchange Rate Firms on Resilient UK Economy
The Pound (GBP) drew support from Bank of England (BoE) interest rate expectations at the start of last week.
But Sterling was unable to hold on to these gains for long after National Institute of Economic and Social Research (NIESR) warned the UK faces five years of lost growth.
However, a surprise expansion in GDP growth boosted Sterling again at the end of week. Against expectations growth would stall, the UK economy expanded by 0.2% in Q2.
Meanwhile, the Australian Dollar (AUD) struggled for much of last week. A myriad of downbeat data and souring market mood dragged the ‘Aussie’ lower.
A sharp slump in consumer confidence was soon compounded by Chinese deflation fears.
The risk-sensitive ‘Aussie’ found some modest support in mid-week trade. Additional tightening prospects from the Reserve Bank of Australia (RBA) prevented further slides.
However, a risk-off mood swept the markets in the wake of stronger-than-expected US PPI data and pushed the Australian Dollar lower to end the week.
Three Things to Watch Out for This Week
- UK Inflation Rate
Headline CPI is predicted to cool to 6.8%, the lowest level since March 2022. However, with the target rate some way off, Sterling could still be strengthened by BoE rate hike bets.
- RBA Meeting Minutes
After a second consecutive pause at the last meeting, the minutes could shed some light on how the central bank views its inflation outlook. A hawkish tilt could lift the ‘Aussie’.
- UK and Australia Labour Market Data
The UK and Australian jobless rates are expected to print at an unchanged 4% and a modest climb of 3.6% respectively. Cooling labour markets could pare rate hike bets, potentially denting both currencies.
Pound Australian Dollar Forecast
Elsewhere, UK retail sales are expected to record a 0.5% slump in July, the first drop since March as the cost-of-living crisis rages on.