The Pound Australian Dollar (GBP/AUD) exchange rate slid last week, as the Bank of England (BoE) left interest rates on hold.
What’s Been Happening: Pound Rocked as BoE Holds Fire
The Pound (GBP) began last week on a subdued note, as the data calendar remained bereft of impactful releases.
This continued through to the middle of the week, as attention shifted towards the Bank of England’s imminent interest rate decision. With a pause widely anticipated, GBP investors appeared hesitant to make any firm bets.
The BoE left interest rates unchanged, and provided a bleak assessment of the UK’s economic outlook. The assertion that the UK had a 50/50 chance of falling into recession rocked Sterling.
However, Friday saw the increasingly risk-sensitive Sterling climb rapidly against most major peers, as the market mood improved significantly. While there was another lull in data releases, GBP was able to hit multi-month highs against its peers.
Over the course of the week, the risk-sensitive ‘Aussie’ managed to strengthen against its peers. As risk appetite began to return following the Federal Reserve’s dovish rate decision, AUD exchange rates climbed in tandem.
Three Things to Watch Out for This Week
- UK GDP
The UK’s third quarter GDP data is due out on Friday. Economists have forecast a 0.1% contraction on a quarterly basis, which could weigh heavily on GBP.
- RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) are expected to hike rates by 25bps later tonight, which may send AUD higher.
- BoE Pill Speech
BoE Chief Economist Huw Pill is due to speak this evening. Hawkish remarks could strengthen Sterling amid renewed BoE rate hike bets.
Pound Australian Dollar Forecast
The GBP/AUD exchange rate could see further volatility over the course of the week’s session, if market conditions remain cheery. As the ‘Aussie’ is a riskier asset than Sterling, bullish trade could cause GBP/AUD to stumble.