The GBP/AUD exchange rate nosedived last week as a prevailing risk-on mood propelled the Australian Dollar sharply higher.
What’s Been Happening: Risk-On Mood Turbo Charges the ‘Aussie’
The Australian Dollar skyrocketed last week, carried higher by improved risk appetite amidst hopes more lockdown easing will facilitate a sharp rebound in global growth.
This upbeat mood was shared by the Reserve Bank of Australia (RBA), which aided in the ‘Aussie’s accent after suggesting the depth of Australia’s impending recession may be much less than first feared.
However, the Australian Dollar eased back from its best levels towards the end of the week as some lacklustre domestic data prompted some profit taking.
Meanwhile, trade in the Pound was mixed last week, in light of some better-than-expected PMI figures and renewed Brexit jitters.
Three Things to Watch Out for This Week
- UK GDP
In the spotlight this week will be the UK’s latest monthly GDP release. April’s figures will show the impact of the first full month of lockdown and may offer some hints at the depth of the recession the UK faces.
- UK Coronavirus Headlines
Also likely to influence GBP exchange rates will be any headlines regarding the UK’s battles against the coronavirus. The UK is struggling to get its numbers down and this could create complications for the reopening of the economy.
- Tensions with China
For AUD investors the focus will be on the US and Australia’s souring relations with China, with tensions in the pacific region potentially limiting any further upside in the ‘Aussie’.
GBP/AUD Forecast
The GBP/AUD exchange rate may test new lows this week, with a sharp drop in GDP and concerns over the UK’s coronavirus statistics both likely to apply some pressure to Sterling sentiment.