The Pound Australian Dollar (GBP/AUD) exchange rate climbed over the past week. A worrying rise in Chinese Covid levels weighed on the ‘Aussie’. Upbeat UK data and Bank of England (BoE) bank hike bets helped to bolster Sterling.
What’s Been Happening: Australian Dollar Undermined by China Covid Developments
The Australian Dollar faced headwinds last week as soaring Covid case levels in China added to concerns of a global slowdown and demand for Australian exports.
While a pullback in the US Dollar offered some support to the risk-sensitive ‘Aussie’, these gains were capped by poor domestic data. Below-forecast PMI figures on Tuesday saw the country’s dominant services sector fall further into contraction.
Meanwhile, the Pound initially saw muted bets last week. A lack of data saw concerns over the UK’s Autumn Statement prompt subdued trading around Sterling.
Better-than-forecast PMI data helped the Pound climb on Wednesday. The data represented the first improvement since June and helped to bolster hopes the UK’s may be facing a milder recession than previously feared.
Bets on a 50bps interest rate hike from the BoE at their next meeting also bolstered Sterling.
Weekly highlights
- China Covid Unrest
Protests are currently taking place in China over the country’s strict ‘zero Covid’ policy. Markets are concerned that the protests could create further roadblocks to growth. Could the disruption prompt losses in AUD?
- BoE Rate Hike Bets
The coming week is set to see speeches from several BoE policymakers. With investors continuing to price in a 50bps rate hike from the central bank, will some hawkish comments push GBP higher?
- RBA Lowe Speech
Markets will be watching Reserve Bank of Australia (RBA) Governor Philip Lowe for any signs of forward policy. Will Lowe stick to the RBA’s dovish pivot and cause losses for the ‘Aussie’?
GBP/AUD Forecast
Trade in the Pound Australian Dollar exchange rate is likely to be choppy this week, with market risk appetite likely to remain volatile amid fears over the potential repercussions for China’s large-scale protests.