The Pound Australian Dollar (GBP/AUD) exchange rate trended up in the first half of last week’s session, only to dip on a risk-off sentiment that favoured the Australian Dollar (AUD).
What’s Been Happening:
The Australian Dollar sank against its peers at the start of last week’s session, as key commodity prices dropped from the previous week’s highs.
The Pound (GBP) climbed against the ‘Aussie’, bolstered by risk-on tailwinds as humanitarian corridors were established across Ukraine – but plateaued midweek as AUD received support from the Reserve Bank of Australia (RBA).
RBA Governor Philip Lowe sought to temper market rate hike expectations, but investors seized bullishly upon his suggestion that interest rates could ‘plausibly’ be raised this year.
In the second half of the week, GBP lost ground against the ‘Aussie’ on risk-on sentiment: Ukrainian and Russian diplomats met in Turkey to discuss the situation in Ukraine.
AUD gains were capped, however, by news that Russian missiles had killed children and parents as they attempted to flee to safety.
Sterling spiked back up at the end of the week as UK GDP grew by 0.8% in January. This represented the strongest monthly expansion since June.
Falling iron ore prices contributed towards AUD losses, as prices of the commodity dropped by around 2.6%.
Three Things to Watch Out for This Week
- Employment Data
In both the UK and Australia, unemployment is expected to have fallen 1% as per the latest data. If this is the case, the Pound and the ‘Aussie’ may both enjoy tailwinds.
- BoE Interest Rate Decision
The Bank of England (BoE) is expected to hike interest on Thursday, applying potential GBP upside.
- Fighting in Ukraine
It is hoped that further talks today between Russia and Ukraine will produce a ceasefire agreement – such hopes may buoy morale.
Pound Australian Dollar Forecast
The Pound Australian Dollar exchange rate is expected to trade on external pressures this week, in addition to various data releases.
If Russian forces are able to seize further control in Ukraine, it is likely that risk-off sentiment will subdue GBP/AUD trading.