The Pound Australian Dollar (GBP/AUD) exchange rate wavered through the course of last week as fears of a recession clouded trading prospects.
Record high UK inflation pressured the Pound (GBP) midweek, while the Australian Dollar (AUD) enjoyed tailwinds on account of hawkish rhetoric from the Reserve Bank of Australia (RBA).
What’s Been Happening:
At the beginning of the week, the Pound sank against the ‘Aussie’ due to Brexit fears. Ireland’s Foreign Minister warned Boris Johnson against making unilateral changes on to the agreement for fear of triggering an EU-UK trade war.
Subsequently, Sterling rebounded on upbeat jobs data, while the Australian Dollar enjoyed some upside on account of hawkish RBA meeting minutes.
Midweek, UK inflation hit 9%, triggering GBP downside. The CPI represented the highest UK’s rate of inflation in over 40 years, despite missing the 9.1% forecast.
Positive employment data from Australia subdued the exchange rate on Thursday, although the Pound enjoyed some support from better-than-expected industrial trends orders.
At the end of the week, GBP/AUD slumped on fears of a global recession; AUD found some support on news that the People’s Bank of China (PBOC) cut its five-year loan prime rate by 15 basis points to counter an economic slowdown.
Sterling soon recouped its losses, however, on upbeat retail sales, which revealed an increase in the month of April rather than a decline as expected.
Three Things to Watch Out for This Week
- PMI Data
Both the UK and Australia are due to release flash PMIs tomorrow; both countries are expecting weaker activity in May, potentially exerting headwinds across the board.
- AU Retail Data
Australian retail sales are forecast to have grown in April, albeit by less than in March. If Friday’s release prints as expected, AUD may enjoy support.
- Global recession fears
If fears of a global recession persist into this week, risk-off headwinds may dampen trading sentiment for both the Pound and the Australian Dollar.
Pound Australian Dollar Forecast
Other external factors may also affect the Pound Australian Dollar exchange rate, including the war in Ukraine.
The United Nations reported earlier today that the conflict has caused over 100m people to be forcibly displaced.