The Pound Australian Dollar (GBP/AUD) exchange rate climbed through the first half of last week, before slumping on UK inflation and energy crisis headwinds.
A better-than-expected UK services PMI initially boosted Pound (GBP) sentiment– subsequently, UK inflationary pressures and a lower-than-expected construction PMI subdued GBP, while the Australian Dollar (AUD) firmed on optimistic comments from the Prime Minister.
What’s Been Happening: GBP Dented by Inflationary Pressures, AUD benefits from Vaccine Comments
The Pound began last week trading up against the Australian Dollar as the latter was subdued by political turmoil, as John Barilaro, the deputy premier of New South Wales, resigned overnight.
A risk-off sentiment then weighed heavily against AUD, as a second Chinese property developer joined Evergrande in missing a dollar bond payment. The UK services PMI was revised higher in September from 54.6 to 55.4; a small but significant amendment signalling strong recovery within the services sector.
Midweek, Sterling reached an 8-day high against the ‘Aussie’, before falling to a monthly low as several UK energy suppliers collapsed. Steel, glass and chemical manufacturers were especially hard hit by wholesale gas prices.
GBP/AUD continued to slide in the second half of the week, as the Australian Prime Minister Scott Morrison commended the country’s vaccination drive so far, remarking ‘we’re on the home stretch’.
At the end of the week, a cautious market mood renewed AUD downside as the threat of an energy crisis, global supply chain problems, and widespread inflation concerns weighed upon trading sentiment.
Three Things to Watch Out for This Week
- Business / Consumer Confidence
Australian business and consumer confidence is expected to increase on last month, potentially lending support to the Australian Dollar.
- Employment Data
UK employment data prints tomorrow, with unemployment looking to decrease – on Thursday, Australian unemployment is expected to rise.
- UK GDP
The UK’s GDP 3-month average is expected to fall slightly, as supply chain concerns filter into the data.
Pound Australian Dollar Forecast
A clutch of significant data this week is likely to drive movement in the GBP/AUD exchange rate. Business and consumer confidence figures reflect public perception, while employment data reveals the extent of jobs recovery as society reopens more fully.
UK GDP is likely to reflect the current obstacles facing Britain’s economy, while production data will reveal the extent to which material and worker shortages have affected industry.