The Pound Australian Dollar (GBP/AUD) exchange rate edged lower last week. Bets on less aggressive action from the Bank of England (BoE) weighed on the pairing. Concerns over China’s Covid situation limited GBP/AUD’s losses, however.
What’s Been Happening: Pound’s Losses Limited by Surprise GDP Uptick
The Pound (GBP) ticked lower last week. Continued industrial action across the UK dented confidence in Sterling.
A pullback in bets on further interest rate hikes from the BoE also pulled GBP lower. A slowdown in US inflation and falling UK energy prices pointed to easing price pressures.
The Pound found some support from Friday’s better-than-expected GDP figures, however. November’s GDP data printed at 0.1% to reveal an unexpected expansion in the UK economy.
Meanwhile, the Australian Dollar (AUD) climbed last week. AUD saw a boost from above-forecast retail sales figures on Wednesday.
Chinese data had a mixed effect on the ‘Aussie’ last week. On the one hand, an uptick in China’s December inflation allayed fears of deflation.
On the other hand, a drop in China’s exports kept pressure on AUD on Friday. Forecasts of a protracted Covid wave across China also weighed on the ‘Aussie’.
Three Things to Watch Out For This Week
- UK Employment Data
On Tuesday, UK unemployment is forecast to remain close to record lows alongside persistently strong wage growth. Will signs of a tight labour market bolster the Pound?
- UK Inflation
December’s inflation is forecast to slip on Wednesday. After indications last week of easing price pressures, could the data see markets pare back BoE rate hike bets?
- Australian Unemployment Rate
December’s unemployment rate is expected to remain unchanged from October’s low of 3.4%. Will the data inspire bets on further rate hikes from the Reserve Bank of Australia (RBA)?
GBP/AUD Forecast
A forecast recovery in UK retail sales in December could lend some support to the Pound. The figures come after strong profit reports from British retailers. For the ‘Aussie’, China’s fourth-quarter GDP data could pull the currency lower if the economy cools as forecast.