The Pound Australian Dollar (GBP/AUD) exchange rate hit a monthly low last week as a variety of factors contributed toward the weakening of the Pound (GBP) against its peers.
Meanwhile, the Australian Dollar (AUD) was buoyed by upbeat Chinese data and a better-than-expected employment release.
What’s Been Happening: Downbeat Forecasts, Political Turmoil Dents GBP
The Pound faced downside early in the week, as UK retail sales fell for the third consecutive month by an above-average amount. Australian Dollar gains were capped, meanwhile, by falling commodity prices and consumer sentiment.
Subsequently, Sterling was unable to make significant gains despite better-than-expected global expansion in May 2022.
The increase in GDP was explained by the extra working day on account of the Jubilee bank holiday being moved to June: analysts forecast a consequent contraction the following month.
On the other hand, the ‘Aussie’ was boosted by an upbeat Chinese trade balance and positive employment data.
Australia’s June unemployment rate dropped by more than forecast to 3.5%, while the economy added 88,400 new jobs as opposed to the 30 thousand predicted.
At the end of the week, GBP headwinds persisted as cautious trading capped gains for the currency while political uncertainty weighed upon investors’ spirits. Meanwhile, upbeat Chinese retail sales may have helped to limit AUD downside.
Three Things to Watch Out for This Week
- RBA Meeting Minutes
Minutes from the Reserve Bank of Australia (RBA)’s policy meeting on 5 July may weaken the ‘Aussie’, reflecting investors’ original downbeat response to the 50bps interest hike.
- UK Inflation
If UK CPI increased in June as expected, GBP could be buoyed by rising bets of aggressive rate hikes from the Bank of England (BoE).
- UK Employment Data
The UK’s rate of unemployment is expected to have remained unchanged in May, possibly limiting Sterling gains; on the other hand, a marginal increase in average earnings could cap losses.
Pound Australian Dollar (GBP/AUD) Forecast
The Pound is also likely to be affected by political developments this week, as prime ministerial candidates are narrowed down.
Central bank rhetoric could further affect GBP/AUD, alongside UK retail and manufacturing data.