The Pound Australian Dollar (GBP/AUD) exchange rate fell through the course of last week as a risk-on mood was triggered, with world leaders holding out for a diplomatic solution to the Russia-Ukraine crisis.
What’s Been Happening: Economic Data and Risk Sentiment Drive Movement
The Pound fell against the Australian Dollar (AUD) on Monday as a rise in the UK’s average earnings failed to buoy Sterling.
Analysts revealed that the rise in wages lagged behind inflation: GBP came under pressure from a growing focus on the cost of living crisis.
Meanwhile, the Australian dollar dipped briefly on geopolitical tensions, but recovered on Tuesday as Russian troops were said to be returning to their military bases. Midweek, the ‘Aussie’ shrugged off weak Chinese inflation data as risk-on trading continued.
The Pound climbed against the ‘Aussie’ on Thursday as investors focused on UK inflation. The CPI rose to 5.5% in January 2022, raising the likelihood of a March interest rate hike from the BoE.
At the end of the week, both currencies performed well against their peers: positive jobs data buoyed AUD, while GBP found support on rising retail sales, which rose by 1.9% in January.
Three Things to Watch Out for This Week
- Russian Threat of Invasion
If Russia invades Ukraine, as US officials suggest they are on the brink of doing, the ‘Aussie’ would likely plummet on risk-off trading. - RBA Speakers
Several representatives from the Reserve Bank of Australia (RBA) are due to speak this week. Economists hope that a tight labour market may lead to a more hawkish RBA. - BoE Forward Guidance
BoE Governor Bailey will speak on Thursday, preceded by Dave Ramsden and Silvana Tenreyro. A March rate hike is already priced in – if a dovish tone is struck, GBP may tumble.
Pound Australia Dollar Forecast
UK PMI data may influence the Pound through the remainder of today’s session; followed later in the week by industrial trends and distributive trades data. Industrial trends are expected to increase, but declining distributive trades could subdue Sterling trading.