Will Signals of Further RBA Rate Hikes Pull Pound Australian Dollar (GBP/AUD) Exchange Rate Lower? » Future Currency Forecast

Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound after Upward Revision in AU Services PMI

The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. The pairing may be seeing any gains limited by above-forecast Australian and Chinese PMIs. On the other hand, bets on further interest rate hikes from the Bank of England may be underpinning GBP/AUD today.

Could Hawkish RBA Signals Push Australian Dollar (AUD) Higher?

The RBA’s interest rate decision on Tuesday is set to have a limited impact on the Australian Dollar (AUD). The 25bps rate hike has largely been priced in by markets.

Investors will instead be watching the central bank for any signs of further policy tightening at their future meetings. Economists are anticipating that the RBA will seek to push its peak rate higher-than-expected. Any hawkish signals could push AUD higher.

A raft of Chinese data could also drive movement in the risk-sensitive ‘Aussie’ next week. On Tuesday, trade figures for China could underpin the Australian Dollar if the country’s trade surplus expands as forecast.

Additionally, the latest Chinese inflation data on Thursday could provide a further boost to AUD. February’s inflation is expected to rise to 2.3%, limiting fears of disinflation in the world’s second-largest economy.

Will Upbeat GDP Data Boost Pound (GBP)?

Looking to the coming week for the Pound, the British Retail Consortium’s (BRC) retail sales monitor could pull GBP lower if Tuesday’s figures print as forecast. The gauge of the sector’s health is expected to cool to 2.1% in February.

On Friday, the latest GDP figures could provide a welcome boost to the Pound if they print as expected. The UK’s economist is forecast to have expanded by 0.1% in January. The data could also help to ease fears of a deep recession in the country.

Also on Friday, a forecast narrowing in the UK’s trade deficit could further bolster Sterling. January’s deficit is expected to taper to £-2.7bn.

The Pound could also find support from Bank of England (BoE) rate hike bets in the coming week. Following Chief Economist Huw Pill’s upbeat comments on Thursday, markets are pricing in further rises from the central bank.  

Finally for Sterling, any further developments concerning the UK-EU Northern Ireland deal could prompt movement in GBP. The UK government is still waiting for a clear stance from NI’s DUP over the ‘Windsor Framework’.