The Pound Australian Dollar (GBP/AUD) exchange rate climbed to a two-week high last week after the Reserve Bank of Australia (RBA) left interest rates unchanged for the fourth consecutive month.
What’s Been Happening: GBP/AUD Climbs as RBA Leaves Rates Unchanged
The Australian Dollar (AUD) got off to a poor start last week after the latest monthly inflation gauge for Australia printed at 0%, rather than the 0.4% forecast.
This set the stage for the RBA’s dovish monetary policy decision, with the central bank opting to leave interest rates unchanged for the fourth month in a row. AUD slumped in response.
The ‘Aussie’ attempted to regain ground against the muted Pound (GBP) following stronger-than-expected Australian data.
However, Sterling strengthened midweek after the UK’s final services PMI for September was revised significantly higher, suggesting the UK economy was in better health than previously feared.
Better-than-expected Australian trade data helped AUD to find fleeting success in the latter part of the week. But a gloomy mood then pressured the risk-sensitive ‘Aussie’.
Meanwhile, Sterling seemed to find support as markets bet on UK interest rates staying higher for longer, following recent Bank of England (BoE) comments and the upwardly revised services PMI earlier in the week. GBP/AUD hit a two-week high.
Three Things to Watch Out for This Week
- UK GDP
UK GDP for August is due out on Thursday, with forecasters expecting to see 0.2% growth in the British economy. If the data prints as expected, it could boost the Pound.
- Australian Consumer Confidence
An expected decline in Australian consumer morale could weigh on the ‘Aussie’ Dollar early in this week’s session.
- Risk Appetite
An eruption of violence in Israel over the weekend has spooked global markets. An anxious mood among investors could keep the risk-sensitive Australian Dollar on the defensive throughout the week.
GBP/AUD Forecast
Australia’s latest business confidence index is also expected to show a deterioration in morale, potentially adding to AUD’s woes. If this week’s economic data prints as expected and the global market mood remains risk averse, the GBP/AUD exchange rate could climb to new multi-week highs.