Pound Australian Dollar (GBP/AUD) Weekly Forecast: Exchange Rate Falls as UK Economy Slumps in Third Quarter

The Pound Australian Dollar (GBP/AUD) exchange rate dropped over the past week. Evidence of a further contraction in the UK economy pulled the exchange rate lower. News that China would be loosening its Covid-19 restrictions also kept pressure on the pairing.

What’s Been Happening: Pound Slumps as GDP Figures Point to Third Quarter Downturn

The Pound (GBP) fluctuated over the past seven days. An Increasingly gloomy outlook for the UK injecting some volatility into the currency.

The UK’s poor outlook and some dovish comments from Bank of England (BoE) the previous week kept bets on GBP limited.

Fresh GDP data on Friday also prompted losses in Sterling. The GDP figures indicated a third quarter contraction in the UK economy. The contraction wasn’t as bad as forecast however, limiting drastic losses for the currency.

The Australian Dollar (AUD) saw subdued bets at the beginning of last week. The ‘Aussie’ firmed as the week went on however, with a return of risk appetite bolstering AUD.

News that China would be reducing its Covid-19 quarantine period for visitors also helped the currency to make gains.

On the other hand, a fall in Australian business confidence kept gains for the ‘Aussie’ limited.

Weekly highlights

  1. RBA Meeting Minutes

After the recent dovish signals from the Reserve Bank of Australia (RBA), investors will be anticipating further confirmation of a slowdown. Will the release of the minutes push AUD lower?

  1. UK Employment Data

September’s employment figures are forecast to remain close to record-lows. Will the evidence of a tight labour market increase BoE rate hike bets and bolster GBP?

  1. UK Inflation Data

October’s inflation is set to climb to fresh record-highs this week. Will higher prices weigh on the Pound, or will the data see GBP climb amid increased rate hike bets?

GBP/AUD Forecast

The UK government’s Autumn statement on Thursday could also weigh on Sterling if their policy direction adds to recession predictions.

Australia’s unemployment figures for October could bolster the ‘Aussie’ if they remain close to record-lows.

Gareth Monk

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