The Pound Australian Dollar (GBP/AUD) exchange rate fell last week as disappointing UK data and Reserve Bank of Australia (RBA) interest rate hike bets weighed on the currency pairing.
What’s Been Happening: GBP/AUD Stumbles as UK Data Disappoints
GBP/AUD started the week strong, hitting a five-week high as an anxious market mood weighed on the risk-sensitive Australian Dollar (AUD).
However, the Pound (GBP) soon came under pressure. The latest UK employment data contained signs that the labour market was cooling, while October’s flash PMIs revealed ongoing contractions in both manufacturing and service sector activity.
Midweek, Australian inflation exceeded forecasts, with the ‘Aussie’ hitting a three-week high against Sterling.
A souring market mood helped GBP regain ground against the riskier Australian Dollar, while comments from RBA Governor Michele Bullock also dented AUD. Bullock shrugged off the hot inflation reading, denting rate hike bets.
Nevertheless, Australian bank Westpac followed others in predicting a November rate rise from the RBA, thereby reigniting support for the ‘Aussie’.
At the same time, downbeat UK sales data weighed on GBP. The Confederation of British Industry’s (CBI) latest distributive trades survey plummeted, showing its worst October reading since 2017.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The Bank of England (BoE) interest rate decision is in the spotlight this week. If the bank leaves interest rates unchanged, as expected, Sterling could slide.
- Australian Trade Data
Australia’s trade surplus is forecast to have narrowed slightly in September. Any surprise results could drive volatility, with a weaker surplus potentially denting AUD.
- Risk Appetite
Meanwhile, the market mood will also likely continue to impact the ‘Aussie’. A dovish Federal Reserve decision could cheer markets, boosting AUD, while escalating geopolitical tensions could temper risk appetite.
GBP/AUD Forecast
In addition, the final PMI results and a flurry of RBA speeches could impact GBP/AUD this week. Any revisions to the PMIs could affect the respective currencies, while investors will also be carefully combing RBA policymakers’ comments for hints ahead of the bank’s rate decision next week.