Pound Australian Dollar (GBP/AUD) Weekly Forecast: Exchange Rate Slumps on GBP Weakness

The Pound Australian Dollar (GBP/AUD) exchange rate fell overall last week as the Pound (GBP) succumbed to downside over cost-of-living concerns and poor risk appetite. Meanwhile, the Australian Dollar (AUD) was able to climb on bullish expectations for the Reserve Bank of Australia (RBA).

What’s Been Happening: Exchange Rate Wavers on BoE Rhetoric, AU Inflation

At the beginning of the week, worse-than-expected data from the Confederation of British Industry dented Sterling sentiment, with business optimism for the second quarter dropping to -34.

Meanwhile, AUD gains were capped as China contemplated enforcing further lockdowns in Beijing to contain the spread of the coronavirus.

Subsequently, the ‘Aussie’ climbed on optimistic rate hike bets from the Reserve Bank of Australia, while dwindling rate hike bets for the Bank of England (BoE) kept GBP subdued, as UK living costs mounted.

Midweek, GBP/AUD rebounded briefly following the release of Australia’s annualised CPI, as investors bought the dip – AU inflation exceeded expectations of 4.6%, instead soaring to 5.1%. AUD downside was extended by a pullback in some key Australian commodities.

The Pound then trended down against the ‘Aussie’ on risk-off headwinds, as upbeat trading forecasts bolstered AUD; Australian PPI printed above predictions, supporting the Australian Dollar against the majority of its peers.

Three Things to Watch Out for This Week

  1. BoE Interest Rate Decision

Following the RBA’s 0.25% rate hike this morning, the BoE is expected to raise interest rates to 1% on Thursday. Such a move could bolster Sterling, if accompanied by hawkish rhetoric.

  1. PMIs

Australia and the UK are scheduled to print PMI data this week. Services activity is forecast to have fallen in both countries, applying potential downside.

  1. AU Trade Balance

Australia’s trade surplus looks to have increased in March 2022. If this is confirmed on Thursday, AUD could enjoy tailwinds.

Pound Australian Dollar Forecast

Also likely to affect the Pound Australian Dollar exchange rate is the conflict in Ukraine. If Russia acts on alleged plans to annex areas of eastern Ukraine, global risk sentiment could fall, denting both GBP and AUD prospects.

Olivia Evershed

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