GBP AUD Will Look to Economic Data After Bearish Week

GBP AUD Tests April Lows After BoE Rate Hike

The GBP AUD exchange rate dropped on the week from 17-week highs as fears set into the pound sterling. The market awaits PMI data for the UK and Australia, which will set the tone. However, there is political uncertainty for the British Pound as the inquiry into the Downing Street parties could cost Boris Johnson his job, despite his best efforts to remove all virus restrictions and boost his polls.

The GBP to AUD rate was trading at 1.8860 and has surrendered support at 1.8917.

Australian and UK PMI data awaits on Monday

The Pound Sterling versus the Australian Dollar is waiting for PMI data on Monday, which is a good indicator of future GDP numbers.

Both economies have rebounded well from recent lockdowns and virus struggles, but the Aussie dollar has the potential to play catch-up after the interest rate expectations were brought forward for the RBA.

Markets are now betting that a tightening will come a lot sooner than expected, perhaps as early as May. Data on Australian consumer prices for the December quarter is due this week and economists are predicting core inflation could jump to its highest since 2009.

Bill Evans, chief economist at Westpac, said a rate hike could now come in August, following his previous call for February 2023.

“Our forecast revisions reflect a much faster lift in inflation and wages growth than envisaged,” said Evans. “We now expect one hike of 15 basis points in August to be followed by a further hike of 25 basis points in October.”

The previous composite PMI for the Australian economy was 54.9, while the UK will try to beat last month’s 53.6, with markets looking for 55.

A crunch week waits for Boris Johnson

In the United Kingdom, the Prime Minister will wait for the findings of the Sue Gray report into the Downing Street party during lockdown. That could lead to the Prime Minister being ousted from the leadership and add political instability to the pound sterling.

The Deputy Prime Minister, Dominic Raab, is already trying to backtrack by saying that a full publication may not happen. Raab said that the amount of detail released is a matter for Boris Johnson.

The justice secretary and deputy prime minister have vowed “full transparency,” but refused to give further specifics on the statement, which sounds contradictory. Gray, the senior civil service tasked with investigating the party claims, will publish the report in the coming days.

“Quite the way the process for it will be for the prime minister to decide. But there will be full transparency. He has said he will come back to the Commons and make a statement, so there will be full scrutiny,” Raab said.

Powered by Lumon

Johnson announced the end of all restrictions for the coronavirus last week with mask-wearing and work-from-home advice being ditched. The move was criticised by many as an attempt to boost his flagging polls, with a recent 13-point gap opening up.