The Pound Australian Dollar exchange rate held steady this morning as growing concerns of Chinese economic growth weighs on the risk-sensitive ‘Aussie’. Chinese factory growth fell to its slowest levels since April 2020 sparking unease over the economic recovery for Australia’s largest trading partner.
What’s Been Happening: Pound Rises as UK Economic Mood Improves
The GBP/AUD exchange rate rose to heights of AU$1.89 during last week’s session as a mixture of souring risk sentiment and growing confidence in the UK economy helped uplift Sterling.
While concerns remained over England’s lifting of lockdown restrictions on July 19, data showed that daily Covid-19 cases remained below more dire forecasts. Hospitalisations and daily deaths, however, rose.
Last Wednesday saw the release of the latest Australian inflation figure for the second quarter, which beat forecasts and rose by 0.8% quarter-on-quarter.
Gareth Aird, head of Australian economics at CBA, was downbeat, saying that he now expects the economy to shrink by 2.7% this water.
Last week saw little in the way of UK economic data, with Pound investors instead focusing on UK coronavirus developments.
Downing Street recommended caution, but market mood improved after data revealed that the lifting of restrictions had not substantially effected Covid-19 infections.
Three Things to Watch Out for This Week
- Reserve Bank of Australia (RBA) Interest Rate Decision
This week will see the RBA announce its latest interest rate decision, which is expected to remain at the record low of 0.1%. Could a dovish monetary policy statement, however, see the AUD/GBP exchange rate struggle?
- Bank of England’s (BoE) Interest Rate Decision
The BoE is also expected to hold its interest rate – at 0.1% – but Pound investors will monitor the bank’s forecasts for the British economy. If the BoE is notably dovish, then we would see Sterling head higher.
- UK Covid-19 Developments
If UK coronavirus data continues to point to a decline in daily cases, the Pound Australian Dollar exchange rate would head higher on growing confidence in the nation’s economic recovery.
Pound Australian Dollar Forecast
The GBP/AUD exchange rate could head higher this week if risk sentiment continues to sour, undermining demand for the risk-averse ‘Aussie’.