The Pound Australian Dollar (GBP/AUD) exchange rate tumbled to a two-week low during last week’s session, as troubling British economic data revived recession fears.
What’s Been Happening: GBP/AUD Slides as UK Data Troubles Investors
More losses followed after the UK’s latest jobs report revealed signs that the British labour market is cooling. The unemployment rate rose to its highest level in nearly two years.
Midweek, new GDP data reported a larger-than-forecast contraction in the UK economy in July. This fuelled recession fears and dampened Bank of England (BoE) interest rate rise bets, weighing on the Pound through to the end of the week.
Meanwhile, the Australian Dollar enjoyed strong jobs data on Thursday. A large rise in employment boosted bets on another Reserve Bank of Australia (RBA) rate hike.
A risk-positive mood also supported the ‘Aussie’, with GBP/AUD dropping to a two-week low towards the end of the session.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The BoE meets on Thursday to set interest rates. While the bank is likely to raise rates by 25bps, any signs that it may be near the end of its tightening cycle could dent the Pound.
- UK Inflation
Ahead of the BoE decision, the UK’s August consumer price index is out. Could an uptick in inflation bolster Sterling by prompting bets on additional rate hikes?
- RBA Meeting Minutes
The RBA’s meeting minutes could weaken the ‘Aussie’ if they reveal a dovish consensus among policymakers.
In addition to the above events, we also have the latest British retail sales figure along with this month’s PMI surveys for both Australia and the UK. As a result, we could see some big shifts in the Pound Australian Dollar exchange rate throughout the week. The BoE decision could be the defining factor. A dovish or hawkish tilt could see Sterling slump or soar, respectively.