The Pound Australian Dollar (GBP/AUD) exchange rate slumped last week in the face of poor UK PMI data compounded by political turbulence.
What’s Been Happening: Pound Faltered amid Inflationary Pressures
Poor PMI data sapped demand for the Pound early last week as growth in the services sector edged towards stagnation, printing at 51.8, a plummet from 58.9 the previous month. The dire reading highlighted the impact of the cost-of-living crisis and stoked recession fears.
Midweek, the release of Sue Grey’s report on ‘Partygate’ saw the Pound come under more pressure as political uncertainty around Boris Johnson’s leadership deterred investors.
Meanwhile, the Australian Dollar started the week on the back foot as the Federal Elections saw a change in government with Anthony Albanese and the Labor Party taking the reins. Political instability and weaker-than-expected PMI data saw the ‘Aussie’ lose support.
Further hampering the Australian Dollar was the continued Covid lockdowns in China, slowing down the Chinese market and in turn, the China-proxy AUD.
Towards the end of the week, the Pound saw a drop despite Chancellor Rishi Sunak announcing a fiscal support package worth £15bn to ease inflationary pressures. Compounding issues for Pound Australian Dollar was the printing of positive retail sales out of Australia.
Three Things to Watch Out for This Week
- Australian GDP
The Australian Dollar is set to weaken if an expected slowdown of growth in the Australian economy prints accurately. GDP is predicted to have slowed from 3.4% to 0.7% in the first quarter.
- Partygate Fallout
Despite the verdict in the Sue Grey report appearing to have limited repercussions for Boris Johnson, questions remain over the future of his Premiership.
- Brexit
Without major data due out for the Pound, market movements could be dictated by the ongoing political turbulence surrounding the Northern Ireland protocol. If the UK is unwilling to move away from unilaterally altering the agreement, a trade war could be on the cards.
Pound Australian Dollar (GBP/AUD) Forecast
Looking ahead, the remainder of this week could see the GBP/AUD exchange rate fluctuate further as the long Jubilee weekend creates thin trading conditions in the Pound.