Pound Australian Dollar (GBP/AUD) Weekly Forecast: Exchange Rate Rebounds from 57-Month Low

The Pound Australian Dollar (GBP/AUD) exchange rate is ticking up today from an almost-five-year low, as China’s economy is reported to be slowing, dampening Australian Dollar (AUD) appeal.

This follows a week-long downtrend as the ‘Aussie’ was buoyed by risk-on sentiment and positive business confidence.

What’s Been Happening: Pound Dented by UK Cost-of-Living Crisis

The Pound Australian Dollar exchange rate wavered at the beginning of last week’s session, as mixed AU confidence data capped AUD gains while the Pound (GBP) enjoyed support from a better-than-expected sales report.

The British Retail Consortium (BRC)’s retail sales monitor printed at 1.6% for the year to July, rather than -1.3% as forecast.

Subsequently, GBP/AUD trended down as an upbeat market mood buoyed the risk sensitive ‘Aussie’ alongside bullish expectations for the Reserve Bank of Australia (RBA) and rising commodity prices.

In the meantime, the Pound was subdued by cost-of-living headwinds. Consultancy firm Cornwall Insights warned on Tuesday that energy bills are likely to top £4,200 from January, prompting calls for increased government support.

Despite a meeting on Thursday in which the UK’s business secretary and chancellor of the exchequer met with energy bosses, no firm resolution was reached. Boris Johnson, also in attendance, said it would be for his successor to make significant fiscal decisions.

At the end of the week, UK GDP fell, revealing that the UK economy contracted in June and overall in Q2 2022.

Three Things to Watch Out for This Week

  1. UK Inflation
    The UK’s CPI is expected to have reached 9.8% in July. If this is the case, Sterling may firm on Bank of England (BoE) policy tightening impetus.
  2. Employment Data
    Both the UK and Australia will publish jobs reports this week. In both countries, unemployment is expected to remain unchanged, possibly exerting headwinds.
  3. Central Bank Dynamics
    The RBA’s meeting minutes will be released on Tuesday. If a dovish tone is struck, the ‘Aussie’ may weaken.

GBP/AUD Weekly Forecast

UK retail data may also influence GBP/AUD this week. Sales in July are expected to have contracted by 0.2%, potentially triggering a GBP downslide.

Olivia Evershed

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