The GBP/AUD price crashed to the lowest level since January 2018 as traders focused on the latest UK GDP numbers. It was trading at 1.7158, which was about 10% below the highest point this year.
BoE and RBA convergence
The GBP/AUD price dropped sharply as investors focused on the convergence of the Bank of England (BoE) and Reserve Bank of Australia (RBA). Last week, the BoE decided to hike interest rates by 0.50% in a bid to lower the soaring inflation. The bank has now hiked rates by 3% since December.
The RBA also decided to continue with its rate hikes this month. It pushed by 0.50% and hinted that it will continue the process. The RBA expects that Australia’s inflation will peak at about 7% later this year.
The next key catalyst for the GBP to AUD exchange rate will be the upcoming UK GDP numbers. The data is expected to show that the country’s economy contracted by1.2% in June this year. They also believe that the GDP contracted by 0.2% on an MoM basis, leading to a year-on-year increase of 2.8%.
The Office of National Statistics will also publish the latest trade numbers. Economists expect the data to reveal that the country’s deficit widened to over 22 billion pounds. The other key data to watch will be the latest UK business investments and manufacturing and industrial production.
GBP/AUD forecast
The daily chart shows that the GBPAUD exchange rate has been in a strong downward trend in the past few months. During this time, it has struggled moving below the important support level at 1.7189. It managed to do so during the overnight session,
The GBP/AUD price has dropped below the 25-day and 50-day moving averages while the MACD has moved below the neutral point. It has also moved below the descending trendline shown in green. Therefore, the pair will likely continue falling as sellers target the next key support point at 1.6950. A move above the resistance at 1.7350 will invalidate the bearish view.
