The Pound Australian Dollar (GBP/AUD) exchange rate climbed last week as Covid rules were relaxed and the Omicron variant was proven to be milder than previous Covid strains. The Australian Dollar (AUD) lost ground as iron ore forecasts predicted weaker demand.
What’s Been Happening: Covid News Dominates Headlines, Stock Markets Celebrate
The Pound Australian Dollar began the week subdued, as Pound sentiment was weakened by record numbers of Covid infections.
Sterling then trended progressively higher as Omicron headwinds were overcome by reassurances from health officials, and stock market activity boosted Sterling sentiment.
Boris Johnson was optimistic in his new year’s message, saying ‘our position this December the 31st is incomparably better than last year.’
The ‘Aussie’ enjoyed a brief uptick midweek as a bold market mood supported risk-sensitive currencies. However, gains were capped by confusion following the relaxation of Covid rules hours after test positivity rates soared.
In the UK, trading sentiment was buoyed at the end of the week by the UK government’s decision not to tighten Covid-19 restrictions before the New Year; the ‘Aussie’ sank as analysts predicted that the country’s main commodity, iron ore, will come under pressure into 2022.
Three Things to Watch Out for This Week
- Finalised PMI Data
Both Australia and the UK will release finalised services PMI data this week for the month of December. Activity is expected to have fallen across the board, potentially exerting headwinds.
- RBA Chart Pack
The Reserve Bank of Australia (RBA) release their chart pack tomorrow. Any positive trends could buoy AUD sentiment.
- Covid-19 Dynamics
Risk appetite is likely to be affected by the number of Covid infections worldwide – an increase in deaths and hospitalisations may dent the risk-sensitive ‘Aussie’.
Pound Australian Dollar Forecast
The Pound Australian Dollar exchange rate is likely to be influenced predominantly by Covid updates this week, unless PMI data diverges significantly from earlier estimates.
A bullish or bearish tone from politicians or health experts could also sway GBP/AUD trading, alongside Brexit dynamics: into this week, the Pound is threatened by worries that the British government could yet trigger Article 16.