Pound Australian Dollar (GBP/AUD) Weekly Forecast: Exchange Rate Trends Down on Hawkish RBA

The Pound Australian Dollar (GBP/AUD) exchange rate tumbled over the course of last week, as the Reserve Bank of Australia (RBA) struck a hawkish tone, buoying the Australian Dollar (AUD), while dovish rhetoric from the Bank of England (BoE) dampened Pound (GBP) sentiment.

What’s Been Happening: GBP/AUD Sinks on Central Bank Dynamics

The Australian Dollar enjoyed a boost at the beginning of last week, as Monday’s data exceeded forecasts and the Reserve Bank of Australia voted to hike interest rates by 25bps.

In his statement, Governor Philip Lowe said: ‘The economy has proven to be resilient, and inflation has picked up more quickly, and to a higher level, than was expected.’

The Pound experienced brief upside as the UK’s manufacturing PMI printed above expectations, but subsequently sank as Beijing struggled to contain its coronavirus outbreak, threatening to derail the global economy.

UK local elections also impacted GBP dynamics, as fears of political volatility sparked concern.

Towards the end of the week, Sterling rebounded briefly following the Bank of England’s interest rate decision; news that three of the bank’s rate-setters voted for a 50bps hike lent some support.

Meanwhile, the ‘Aussie’ climbed on upbeat PMI data and an impressive trade balance, but experienced headwinds at the end of the week on more dovish RBA comments.

Three Things to Watch Out for This Week

  1. AU Confidence Data

April’s NAB business confidence looks to have fallen in April, applying potential AUD downside; consumer confidence is also expected to have declined.

  1. UK GDP

UK GDP is expected to have increased by 1% in Q1 2022, according to preliminary data. Sterling may firm if the data prints as forecast.

  1. Chinese Inflation

China’s inflation rate is predicted to have grown to 1.8% in April, on an annualised basis. If the news buoys the Chinese Yuan (CNY), AUD could firm as a proxy for the Chinese economy.

Pound Australian Dollar Forecast

The Pound Australian Dollar exchange rate may also be affected by risk sentiment this week – Russia’s intensifying attacks on eastern Ukraine are contributing towards risk aversion that dampens both GBP and AUD sentiment.

Olivia Evershed

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