The Pound Australian Dollar (GBP/AUD) exchange rate fell to a four-week low last week as hawkish expectations from the Reserve Bank of Australia (RBA) buoyed the Australian Dollar (AUD) while the Pound (GBP) sank on cost-of-living pressures.
What’s Been Happening: Hawkish RBA Lends AUD Upside, Ukraine Conflict Dampens Risk-On Trading
The Pound trended down against the ‘Aussie’ in the first half of the week, despite service sector activity coming in above expectations.
Cost-of-living pressures weighed upon Sterling, alongside subdued trading as reports of civilian massacres emerged from Ukraine. After relatively positive negotiations previously, a diplomatic resolution to the conflict looked further away than ever.
Meanwhile, an aggressive stance from the RBA buoyed the Australian Dollar: while the RBA confirmed interest rates would remain at 0.1% for now, a more hawkish tone than expected buoyed investors’ spirits.
In the second half of the week, GBP recouped some of its losses against AUD, as Australia’s Balance of Trade printed a sharp decline to $7.46 billion in March.
Also weighing upon the ‘Aussie’ were downbeat forecasts from economists at ING, who predicted that the Australian Dollar’s momentum would slow.
Three Things to Watch Out for This Week
- Employment Data
The number of people in the UK in work is expected to have increased in January, inspiring potential GBP/AUD upside. Likewise, Australia’s March employment rate is forecast to have risen, which may reverse exchange rate upside.
- UK Inflation
UK inflation is expected to have risen to 6.7% in March 2022, on an annualised basis. If the CPI increases as expected, Sterling may climb.
- Ukraine conflict
Russia reportedly continued shelling regions in eastern Ukraine over the weekend, subduing market sentiment. If such attacks continue, risk-off trading could subdue both GBP and AUD.
Pound Australian Dollar Forecast
The Pound Australian Dollar may be influenced by several factors this week.
Australian business and consumer confidence are scheduled to print on Tuesday and Wednesday, respectively; both are expected to fall, potentially boosting GBP/AUD.
Meanwhile, China’s trade surplus is expected to have fallen in March – if Wednesday’s data confirms this, AUD could come under further pressure.