The Pound Australian Dollar (GBP/AUD) exchange rate briefly hit a two-week high last week. However, a pullback in Bank of England (BoE) interest rate hike bets saw Sterling shed its gains by the end of the session.
What’s Been Happening: GBP/AUD Volatile amid Shifting RBA and BoE Expectations
The GBP/AUD exchange rate rallied through the first part of last week’s session, as a dovish interest rate decision from the Reserve Bank of Australia (RBA) saw the Australian Dollar (AUD) slump.
The RBA left rates unchanged for the third consecutive month, with outgoing Governor Philip Lowe saying: ‘inflation in Australia has passed its peak’. Amid speculation that the RBA’s hiking cycle was over, AUD plunged.
Meanwhile, the Pound (GBP) enjoyed modest support after the UK’s final services PMI was revised higher, although it remained in contraction territory.
The ‘Aussie’ rallied through the latter part of the week, however. Australian GDP growth in the second quarter beat forecasts, while the previous quarter was revised higher.
RBA Governor Lowe also delivered a speech in which he insisted that the bank was open to more rate hikes.
As for Sterling, dovish comments from BoE Governor Andrew Bailey saw GBP slide through the final part of the week. Bailey said he expects a ‘quite marked’ fall in inflation and that the bank is ‘much nearer now to the top of the [tightening] cycle’.
Three Things to Watch Out for This Week
- UK Jobs Report
If the UK’s latest employment data shows that wage growth held at a record high in the three months to July, fresh BoE bets could support GBP.
- UK GDP
Sterling could then face headwinds on Wednesday, as the latest GDP reading is set to show that the UK economy contracted in July.
- Australian Jobs Report
Australia’s own labour market report is out on Thursday. Could signs of resilience in the jobs market boost RBA expectations?
GBP/AUD Forecast
The Pound ‘Aussie’ pair could see more volatility this week, due to high-impact data with mixed expectations. Also affecting the GBP/AUD exchange rate could be market sentiment. Could a cheery mood lift the riskier Australian Dollar?