Pound Australian Dollar Exchange Rate Weekly Forecast: GBP/AUD Softens on BoE Uncertainty

The Pound Australian Dollar (GBP/AUD) exchange rate weakened throughout the week as downbeat UK employment data and a cautious Bank of England (BoE) sapped demand.

What’s Been Happening: GBP/AUD Exchange Rate Slumps on BoE Mixed Signals

The Pound (GBP) opened the week moderately strongly as an improving market mood buoyed investors. However, worse-than-expected employment data subsequently sapped demand amid fears of a cooling labour market. An unexpected rise in unemployment and weaker-than-expected wage growth pared interest rate hike bets from the BoE, denting Sterling.

Midweek, BoE Governor Andrew Bailey provided mixed messages to investors. Testifying before the Treasury Select Committee, Bailey said that second-round effects from rising wages could still impact the economy, opening the door to further tightening. But offsetting these gains were comments that inflation would fall rapidly from April.

Meanwhile, the Australian Dollar (AUD) started the week on the back foot as minutes from the Reserve Bank of Australia (RBA) proved more dovish than expected. The RBA commented on how inflation would continue to ease, and slowing productivity would weigh on economic growth.

The latest employment data also sapped demand for the ‘Aussie’ as the unemployment rate unexpectedly edged higher.

At the end of the week the ‘Aussie’ rebounded amid an improving market mood. Optimism surrounding the US debt ceiling negotiations buoyed risk appetite and sent the Australian Dollar soaring.

Three Things to Watch Out for This Week

  1. UK Inflation

Expectations headline inflation will cool to 8.3% could see BoE rate hike bets pared, potentially denting Sterling.

  1. Australian PMIs

Mixed PMI readings could cause the ‘Aussie’ to fluctuate as manufacturing is expected to tick lower whilst services are predicted to edge higher.

  1. UK Retail Sales

A predicted 0.4% rebound in sales growth in April could boost the Pound, after falling 0.9% the previous month.

Pound Australian Dollar Forecast

Elsewhere, global market sentiment could continue to heavily influence the Australia Dollar. US debt ceiling negotiations, as well as China’s stuttering recovery, could all weigh on the risk-sensitive ‘Aussie’.

Danny Tingle

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