The Pound Australian Dollar (GBP/AUD) exchange rate slumped last week as UK Prime Minister Boris Johnson resigned, causing dramatic fluctuations in the Pound (GBP). Meanwhile, the Australian Dollar (AUD) sank initially in response to the Reserve Bank of Australia (RBA) hiking interest rates.
What’s Been Happening: UK PM Resigns, AU Trade Surplus Impresses
The Pound faced several headwinds leading up to Boris Johnson’s resignation as Prime Minister, including escalating inflationary pressures and a downbeat outlook from the Bank of England (BoE).
On Tuesday, the BoE’s financial stability report observed that ‘The economic outlook for the UK and globally has deteriorated materially.’
Meanwhile, the ‘Aussie’ also came under pressure as June’s finalised services PMI missed expectations and the RBA hiked interest by 50bps. Australian Treasurer Jim Chalmers commented that the decision was ‘very challenging news’ for households already finding it tough.
Nevertheless, AUD managed to recoup losses as the country’s balance of trade surprised to the upside on Thursday, reaching A$15.965bn instead of the A$10.725bn forecast.
At the end of the week, Sterling downside was exacerbated as over 50 members of Johnson’s cabinet resigned and the PM was forced out. The Pound initially enjoyed tailwinds as the doubts surrounding his leadership were resolved. Uncertainty over his successor subsequently dented GBP, however.
Three Things to Watch Out for This Week
- UK GDP
The UK’s May GDP release is likely to dent Pound sentiment as economists predict a lack of growth in the UK’s economy.
- Australian Confidence Data
Economists forecast NAB business confidence to have declined slightly in June, alongside Westpac consumer confidence. If the data prints as expected, AUD may tumble.
- AU Employment
Markets expect Australia to have added 35K jobs to the economy in June, potentially lending the ‘Aussie’ some support.
Pound Australian Dollar Forecast
Chinese data may also affect the Pound Australian Dollar exchange rate this week, although UK political developments might have a greater impact. If Johnson’s replacement is announced imminently, GBP could climb.