The Pound Australian Dollar (GBP/AUD) exchange rate fell in the first half of last week as a risk-on mood favoured the ‘Aussie’ and new Covid restrictions dampened Sterling appeal. The Pound (GBP) then rebounded in the second half of the week on widespread risk aversion.
What’s Been Happening: AUD Buoyed by Risk Sentiment; UK Restrictions Dent GBP
The Pound fell against the Australian Dollar (AUD) at the beginning of last week as the Confederation of British Industry (CBI) revised its UK growth forecasts down to 6.9% for this year.
Meanwhile, the ‘Aussie’ benefitted from upbeat risk sentiment and news that Queensland would be reopening borders five days earlier than planned.
On Tuesday, rising Omicron cases subdued Pound trading further, while a hawkish statement from the Reserve Bank of Australia (RBA) buoyed AUD.
Midweek, UK officials warned that Covid cases could hit 90,000 per-day by Christmas; meanwhile, China’s pledge to support economic growth supported the Australian Dollar.
Towards the end of the week, Sterling gained on risk-off flows – but was subsequently dented as GDP growth reached just 0.1% in October. The ‘Aussie’ resumed its uptrend on high demand for iron ore in China.
Into this week, the Pound Australian Dollar exchange rate is wavering on a risk-off mood: Australian business confidence has fallen, as the number of UK benefit claimants fell by more than expected.
Three Things to Watch Out for This Week
- UK Inflation
UK inflation is expected to have risen in November – if tomorrow’s release confirms this, Sterling may enjoy tailwinds on increased Bank of England (BoE) policy tightening pressures.
- Australian Employment Data
Australian jobs data is expected to reveal a fall in unemployment on Thursday, potentially lending AUD upside.
- BoE Interest Rate Decision
Thursday’s interest rate decision from the BoE is forecast to leave rates unchanged – however, a hawkish tone could still support Pound trading.
Pound Australian Dollar Forecast
GBP/AUD could also see movement this week on AU consumer confidence, PMI data and British retail sales. Data is expected to be largely positive, although a slowdown in UK manufacturing activity could subdue GBP sentiment.
Risk sentiment may also affect the exchange rate, with growing Omicron fears likely to inspire bearish trading – thereby lending GBP/AUD upside.