The Pound Australian Dollar (GBP/AUD) exchange rate climbed over the course of last week from a seven-week low, as the Australian Dollar (AUD) faced headwinds over a dovish decision from the Reserve Bank of Australia (RBA).
The Pound (GBP) resisted downside pressure as members of the Bank of England (BoE)’s Monetary Policy Committee hinted at imminent tapering.
What’s Been Happening: Pound Firms against AUD Despite Poor UK Data
The Pound struggled to gain against the ‘Aussie’ on Monday, as the UK’s construction PMI printed poorly.
Sterling soon trended up, however, as the RBA extended its A$4bn-a-week tapering timeline until the end of February. Bullish investors had anticipated an earlier withdrawal of monetary policy stimulus.
GBP continued to climb throughout the week, resisting headwinds over a domestic tax hike and Brexit concerns. Strength in the US Dollar (USD) weighed upon the Australian Dollar.
The Pound dropped then climbed again on Friday, as AUD was briefly uplifted by improving Australia-China relations. Disappointing UK GDP figures hindered GBP gains, before BoE optimism lent support and a souring market mood depressed AUD once again.
Three Things to Watch Out for This Week
- Consumer Confidence
Australian business confidence is set to fall tomorrow, albeit by less than last month: Wednesday’s Westpac consumer confidence is also looking to contract, potentially exerting ‘Aussie’ headwinds.
- UK Inflation
The UK inflation rate is expected to climb to 2.9% on Wednesday, which will likely boost GBP if predictions are met.
- Employment Data
The number of people claiming unemployment benefits in the UK is looking to drop by 26K, according to tomorrow’s data. Conversely, unemployment in Australia is estimated to have risen over the last month.
Pound Australian Dollar (GBP/AUD) Forecast
With ‘Aussie’ data predicted to print low on the whole, it’s likely the Australian Dollar will face significant downside pressure this week. Meanwhile, the Pound could receive a boost from strong employment and inflation data.
External factors may also play into GBP/AUD dynamics – AUD may find support on strengthening Chinese trading relations, while Sterling could face further pressure over political tensions, compromising GBP gains.