The Pound to Australian Dollar (GBP/AUD) exchange rate has ticked higher since markets opened this morning. GBP investors are optimistic over the next stage of lockdown easing in England with Prime Minister Boris Johnson to make an announcement this evening.
AUD exchange rates firmed during the Asia-Pacific session after data indicated business confidence jumped to a record high in April.
Last Week: BoE Interest Rate Decision Causes GBP/AUD to Weaken
The Pound steadily weakened against the Australian Dollar last week as the latest interest rate decision from the Band of England (BoE) disappointed investors who expected more tapering.
The risk-correlated Australian Dollar benefited from the Pound’s weakness and a pullback in the US Dollar last week as a positive market mood and better-than-expected PMIs helped to bolster the ‘Aussie’ heading into the weekend.
However, China announcing it had ‘indefinitely suspended’ all activities under the China-Australia Strategic Economic Dialogue limited the Australian Dollar from making further gains against Sterling.
Three Things to Watch for This Week
- UK GDP Data
Wednesday will see the release of the latest preliminary GDP data from the UK for Q1. Although GDP is forecast to have fallen -1.4% as the UK battled through a third national lockdown, the BoE raising growth forecasts for the year may offset concerns over the fall in GDP.
- Australia-China Relations
After tensions between the two countries rose last week, any further deterioration could weigh on the ‘Aussie’ again this week.
At the same time, China inflation rate data could drive movement in AUD exchange rates as, despite rising tensions, the Australian Dollar is a proxy for the Chinese economy.
- Coronavirus Developments
As parts of the UK await the latest lockdown easing measures in a week’s time, investors are increasingly optimistic surrounding the UK’s economic recovery from the virus in the coming months.
GBP/AUD Outlook
This week’s economic calendar is quieter for the Australian Dollar, which will see the currency instead driven by the global market mood, relations with China, and any further coronavirus developments.
Meanwhile, Pound investors will be focusing on the UK economy reopening plan and preliminary GDP data for the first quarter on Wednesday. If GDP fell less than expected in Q1, then GBP could receive further support.