The Pound Australian Dollar (GBP/AUD) exchange rate dropped over the past week. News that China would be lifting its import ban on Australian coal pulled the pair lower. A pessimistic outlook for the UK economy also weighed on GBP/AUD.
What’s Been Happening: Australian Dollar Climbs Despite Soaring Chinese Covid Case Levels
The Australian Dollar (AUD) managed to make gains over the past week despite some downbeat data releases from China. December’s PMI for China’s services sector printed a contraction amid soaring Covid cases.
The ‘Aussie’ was boosted by some optimistic trade news, however. Reports indicated that China would soon be ending its import ban on Australian coal.
The Pound (GBP) slipped over the course of the last week. Sterling was initially pulled lower by ongoing UK strike action amid a lack of data.
Poor final readings of the UK’s service sector PMI for December also kept pressure on the Pound, after being revised lower to report the sector remained in contraction.
Further evidence of a downturn in the UK housing sector also weighed on the Pound.
Three Things to Watch out for This Week
- UK GDP Data
A forecast contraction in the UK’s economy in November could pull the Pound lower on Friday. Will the data add to forecasts a sharp recession for the UK over 2023?
- AU Trade Figures
Australia’s trade surplus is expected to narrow for a second consecutive month on Thursday. Will the signs of a weaker economy lead to reduced bets on further interest rate hikes from the Reserve Bank of Australia (RBA)?
- Chinese Data
Signs of recovery in the Chinese economy could boost the Australian Dollar this week if data prints as forecast. Could an uptick in inflation reduce fears of deflation in the world’s second-largest economy?
GBP/AUD Forecast
For the Pound, a slowdown in UK retail sales on Tuesday could weigh on GBP if Tuesday’s figures print as forecast. Further industrial action could also weigh on the Pound.
While an uptick in November’s retail sales may boost the Australian Dollar on Wednesday if the data prints as forecast.