The Pound Australian Dollar (GBP/AUD) exchange rate wavered in the first half of the week as risk sentiment fluctuated. Midweek, GBP/AUD fell as USD downside lent support to risk-on currencies; the Pound then climbed at the end of the week on strong UK GDP.
What’s Been Happening: Risk Sentiment Buoys ‘Aussie’, Pound Climbs on GDP
The Australian Dollar (AUD) rose at the beginning of the week as AU Prime Minister Scott Morrison struck a bullish tone, asserting that the country must learn to live with Covid.
On Tuesday, upbeat retail data capped AUD losses. Meanwhile, the Pound resisted downside as hopes of an imminent rate hike from the Bank of England (BoE) lent support.
Midweek, GBP plummeted against the ‘Aussie’ as US inflation triggered downside in the US Dollar (USD), bolstering the ‘Greenback’s risk-on peers. AUD shrugged off Covid headwinds and weaker-than-expected Chinese inflation.
On Thursday, GBP/AUD firmed slightly despite allegations that PM Boris Johnson attended a party in breach of lockdown rules. The UK government confirmed its decision to cut England’s minimum isolation period to 5 days.
At the end of the week, the Pound continued climbing against AUD on strong GDP data. The Australian Dollar tumbled against its peers as New South Wales recorded 29 daily Covid deaths – the biggest number since the pandemic began.
Three Things to Watch Out for This Week
- Unemployment Data
Tomorrow’s UK jobs data is expected to reveal no change in unemployment in November, possibly exerting Sterling downside. Meanwhile, AU unemployment is forecast to have fallen – potentially lending AUD support.
- Consumer Confidence
Westpac consumer confidence is forecast to decline tomorrow, exerting possible AUD headwinds. On Friday, UK Gfk consumer confidence also looks to decline, subduing GBP.
- UK Inflation
UK inflation is expected to have increased marginally in December. If Wednesday’s data confirms this, the Pound may be buoyed as the BoE is encouraged to tighten monetary policy.
Pound Australian Dollar Forecast
The Pound Australian Dollar exchange rate is likely to trade in a mixed range this week, given an abundance of data from both the UK and Australia.
Chinese data may also affect trading dynamics, alongside UK retail sales on Friday, which are expected to have fallen in December, exerting possible Sterling headwinds.