The Pound Australian Dollar (GBP/AUD) exchange rate edged lower over the course of last week but spiked on Friday as risk aversion suppressed the Australian Dollar (AUD). GBP/AUD closed the week in a similar position to Monday’s opening levels.
What’s Been Happening: Risk Aversion Boosts Pound Against ‘Aussie’
Throughout the week, the Pound (GBP) came across headwinds from a dovish Bank of England (BoE), inflationary concerns, and political turmoil.
Meanwhile, the ‘Aussie’ was subdued by weakening commodity prices and slowing factory output in the Asia-Pacific region.
In the first half of the week, positive news buoyed AUD, however, as China eased Covid restrictions.
Sterling sentiment was dented by news that the Northern Ireland protocol bill had passed through the House of Commons. The bill is expected to stir up UK/EU tensions.
Recessionary concerns weighed upon both currencies midweek as consumer confidence fell in the world’s largest economy. Upbeat retail data capped ‘Aussie’ losses: the Pound dipped on subsequent income data.
The UK’s finalised GDP data lent Sterling some support, but this was capped by ongoing strike action.
Low market sentiment propelled GBP/AUD upwards at the end of the week, although the exchange rate soon dipped as bullish GBP sentiment waned.
Three Things to Watch Out for This Week
- RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) may hike interest rates on Tuesday by 50bps, potentially causing AUD traders to turn bullish .
- BoE Rhetoric
If the BoE reiterates its plan to raise interest rates ‘gradually’, GBP may soften against its peers.
- Chinese Inflation
If Chinese inflation inches closer to the People’s Bank of China (PBoC)’s target of 3% on Friday, the ‘Aussie’ may climb.
GBP/AUD Dollar Forecast
May’s AU trade balance is likely to affect GBP/AUD, as it is expected to dip slightly. This may reflecting the rising price of imports.
Elsewhere, finalised services PMIs could boost Sterling, if UK activity is confirmed to have expanded at the same pace in June as in May. Australian service-sector output is thought to have declined.