GBP Sinks as RBA Interest Rate Hike Expectations Rise Amid Stubborn Inflation

The Pound (GBP) has struggled against the Australian Dollar (AUD) as markets expect another interest rate hike from the Reserve Bank of Australia (RBA). The RBA is concerned about stubborn inflation, which remains at 3.6%, and stronger economic data shows that activity has remained resilient despite higher borrowing costs. The Australian economy expanded 0.4% in the second quarter and 2.1% from a year earlier, beating expectations.

Meanwhile, the UK faces similar inflation concerns, but the Bank of England (BoE) is more divided on what to do next. BoE Chief Economist Huw Pill argued that higher rates may be needed to prevent the latest inflation shock from lasting longer. However, other policymakers remain cautious as the UK economy absorbs higher borrowing and energy costs.

The difference in rate expectations has kept attention firmly on upcoming inflation and jobs data in both countries. For traders, the UK's August inflation report on 16 September will be particularly important, arriving just one day before the BoE's next interest-rate decision.