The Pound Australian Dollar (GBP/AUD) exchange rate nosedived last Friday as weakness in the US Dollar (USD) supported the Australian Dollar (AUD) to a greater extent than the Pound (GBP).
Looking ahead, the Pound may get a chance to recoup its losses, if PMIs meet or exceed expectations. Australia’s quarterly GDP growth rate is forecast to fall, potentially inflicting headwinds on the ‘Aussie’. Toward the end of the week, both currencies look to face some mixed data.
What’s Been Happening: UK Supply Chains Suffer; Risk-On Mood Favours AUD
Last Tuesday, data from the UK’s CBI distributive trades release revealed that retail stock was waning, as supply chain problems continue to grip the economy and drive up prices. Warning of disrupted Christmas deliveries weighed upon the Pound.
Bullish rhetoric from the Australian Prime Minister Scott Morrison helped to sustain AUD confidence: Morrison refuted claims that Australia could face 25,000 deaths and 270,000 long Covid cases if public health restrictions end once 80% of the adult population is vaccinated.
GBP levelled against the Australian Dollar on Wednesday, despite the UK’s supply chain crisis and worrying vaccination data. Australian construction figures printed below expectations, exacerbating ‘Aussie’ downside.
On Friday, the Pound sustained an ultimate downturn, as USD sentiment plummeted on dovish forward guidance: USD weakness lent disproportionate support to AUD, suppressing the Pound by comparison.
The Pound has extended its losses against AUD today, as consumer credit figures contract alongside mortgage lending for the month of July.
Three Things to Watch Out for This Week
- Australian Balance of Trade
Thursday will bring news of Australia’s Balance of trade, which is expected to reveal a surplus- albeit narrower than June’s.
- PMI Data (Final)
Both currencies print their final PMI figures this week, between tomorrow and Friday.
- US Dollar Dynamics and Risk Sentiment
If USD sentiment remains poor through the week, a risk-on mood could further support AUD.
Pound Australian Dollar Forecast
UK data looks to print poorly in the week ahead: AUD investors anticipate mixed data.
As ever, Covid developments will also influence trading in the week ahead. If either country faces a flare-up in coronavirus cases, extra downside pressure could be invoked.