The Pound Australian Dollar (GBP/AUD) exchange rate climbed significantly last week as the Reserve Bank of Australia (RBA) elected to pause their tightening cycle.
What’s Been Happening: AUD Slides as RBA Pauses Tightening
The Australian Dollar (AUD) weakened substantially last week, as the Reserve Bank of Australia opted to leave interest rates unchanged at 3.6%.
While the RBA did reiterate it was a pause rather than the end of its hiking cycle, the accompanying statement rang dovish to AUD investors. The bank warned that economic growth had begun to slow and could remain downbeat. As a result, the ‘Aussie’ suffered a sell off.
Later in the week, falls in both imports and exports saw the ‘Aussie’ weaken further. Falling by 9%, imports had sunk to the lowest level since June 2022. Towards the end of the week, a souring market mood left the risk-sensitive ‘Aussie’ unable to make much of a recovery.
Meanwhile, UK economic data was thin on the ground.
The Pound (GBP) initially strengthened as markets bet on continued interest rate rises from the Bank of England (BoE).
While GBP/AUD rose at the end of the week, courtesy of a risk-off market mood, the currency pairing’s movement was limited amid thin trading conditions on the Good Friday bank holiday.
Three Things to Watch Out for This Week
- UK GDP
On Thursday, the UK’s latest GDP data is due to print. An expansion of 0.1% is forecast for February, which could boost Sterling.
- AU Employment Data
On Thursday, March’s employment data for Australia is due. With an uptick in the jobless rate expected, this could weigh on the ‘Aussie’.
- Chinese Trade Data
China’s balance of trade for March is due on Thursday. A sharp reduction in the trade surplus is forecast, which could dent the ‘Aussie’ due to AUD’s status as a proxy for the Chinese economy.
GBP/AUD Outlook
Elsewhere, various BoE policymakers are scheduled to speak throughout the week. Chiefly, BoE Governor Andrew Bailey will deliver a speech. If he takes a hawkish stance, GBP could strengthen.