The Pound Australian Dollar (GBP/AUD) exchange rate fell from a 21-week high last week as strong risk sentiment buoyed the Australian Dollar (AUD). The Pound (GBP) then recovered some losses on the prospect of easing coronavirus restrictions.
What’s Been Happening: GBP Subdued by Inflation; Employment Figures Buoy AUD
The Pound fell against the Australian Dollar at the start of the week, as UK Prime Minister Boris Johnson faced calls to resign. Meanwhile, the ‘Aussie’ found support on upbeat Chinese data.
Into Tuesday, Sterling recouped some of its losses as UK employment data impressed overall. AUD dipped briefly on risk-off trading and record high Covid-related hospitalisations.
Midweek, the Australian Dollar resumed its upward trajectory against GBP as weakness in the US Dollar lent support to perceived-riskier currencies. In the UK, a higher-than-expected inflation reading spooked investors.
On Thursday, the ‘Aussie’ climbed initially, as AU unemployment fell to 4.2%. However, Pound losses were soon reversed as MPs rescinded their letters of no confidence and new Covid freedoms were anticipated.
At the end of the week, both currencies came under pressure: poor UK retail data suggested the UK economy shrank last month, while the Russia-Ukraine conflict weighed upon market sentiment, drawing support away from risk-on currencies.
Three Things to Watch Out for This Week
- AU Business Confidence
Australian business confidence looks to have fallen in December, potentially applying AUD headwinds.
- Australian Inflation
Inflation is expected to have increased in Australia to 3.2%. This could buoy the ‘Aussie’, although the Reserve Bank of Australia (RBA) have said they will not hike interest until inflation is sustainably within the 2-3% target range.
- UK CBI Data
The Confederation of British Industry (CBI) will release data this week revealing UK business optimism, industrial trends and distributive trades. Results are likely to be mixed, potentially weighing upon GBP.
Pound Australian Dollar Forecast
The Pound Australian Dollar exchange rate is trading up this morning as the Commonwealth Bank’s flash Manufacturing and Services PMIs fell short of analysts’ estimates.
Looking ahead, a fairly upbeat market mood could boost the ‘Aussie’, while tensions over ‘Partygate’ may cap Pound gains.