Pound Australian Dollar (GBP/AUD) Weekly Forecast: Exchange Rate Rebounds Following Disappointing UK GDP

The Pound Australian Dollar (GBP/AUD) exchange rate peaked early last week, before sinking and rebounding once more on positive Chinese data. UK GDP disappointed market expectations.

What’s Been Happening: Political Developments Drive GBP/AUD Movement

The Pound (GBP) rose against the Australian Dollar (AUD) at the beginning of the week as fears of a Russian escalation of conflict went unfounded. Meanwhile, a risk-off mood and falling commodity prices dampened AUD support.

Subsequently, news of support for the Bank of England (BoE) – via the Queen’s Speech – continued to uplift Sterling, although tailwinds were capped midweek by a resumption of Brexit tensions.

The ‘Aussie’ then managed to climb despite a fall in the Westpac consumer confidence index, as Chinese inflation climbed to 2.1% for the month of April, on an annualised basis.

GBP resumed upside in the second half of the week despite poor GDP data: the UK economy expanded by 8.7% in Q1 2022, according to preliminary estimates – rather than the 9% forecast.

Fears of a recession capped Pound gains, while the Australian Dollar enjoyed support from the prospect of easing lockdown restrictions in Shanghai.

Three Things to Watch Out for This Week

  1. UK Inflation

Inflation in the UK looks to have risen to 9.1% in April, on an annualised basis. This may inspire downside as the BoE grapples with fears of a recession.

  1. AU Employment Data

The Australian unemployment rate is expected to have fallen by 0.1% in April, potentially lending AUD upside.

  1. RBA Meeting Minutes

Tuesday’s release of the Reserve Bank of Australia (RBA)’s latest meeting minutes could provoke GBP/AUD movement, if the minutes indicate a more hawkish or dovish RBA outlook.

Pound Australian Dollar Forecast

The Pound Australian Dollar exchange rate could also be affected this week by UK retail sales, due to be released on Friday.

If April’s sales fell by less than last month, the Pound may enjoy tailwinds.

Meanwhile, risk sentiment and ongoing conflict in Ukraine are also likely to influence the exchange rate, with an escalation in the fighting likely to dim support for both risk-on currencies.

Olivia Evershed

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