The Pound Australian Dollar (GBP/AUD) exchange rate rose, fell and rose again last week as Australian data impressed, but risk aversion ultimately subdued the Australian Dollar (AUD).
Meanwhile, the Pound (GBP) was able to climb on vaccine optimism and hawkish remarks from Bank of England (BoE) governor Andrew Bailey.
What’s Been Happening: GBP faces Brexit Headwinds, Aussie dented by Chinese PMI
The Pound Australian Dollar (GBP/AUD) exchange rate traded level at the beginning of last week as GBP struggled against Brexit headwinds and AUD gains were capped by worries over the Omicron Covid variant.
GBP/AUD subsequently spiked on risk aversion and new isolation measures in Australia which subdued the ‘Aussie’ – both NSW and Victorian Premiers confirmed that all returned overseas travellers must complete PCR testing.
Midweek, the Pound continue to climb against AUD despite upbeat Australian GDP, which printed with a smaller-than-expected decline in growth. Sterling was bolstered by an optimistic tone struck by the BoE’s Andrew Bailey, who observed that the direct economic effects of Covid have attenuated since last year.
In the second half of the week, news regarding the efficacy of newly developed Covid vaccines against virus variants supported the Pound, while Australia’s narrowing trade surplus pressured ‘Aussie’ sentiment alongside weaker-than-expected data from China.
Three Things to Watch Out for This Week
- RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) is expected to leave interest rates unchanged tomorrow. Dovish messaging may subdue AUD sentiment.
- Chinese Inflation
Chinese inflation is scheduled on Thursday and may buoy the ‘Aussie’ if it rises as expected,
- UK GDP
At the end of the week, October’s GDP release may dent Pound trading, as it is forecast to fall to 0.5%.
Pound Australian Dollar Forecast
Looking ahead, the Pound Australian Dollar exchange rate may face headwinds today if the UK’s construction PMI reports a slowdown as expected. Meanwhile, Australia’s November services index is looking to climb to 53, potentially supporting the ‘Aussie’.
Later in the week, GBP/AUD is likely to be influenced by UK retail sales, Chinese data and central bank messaging, in addition to a clutch of UK data on Friday.