The Pound Australian Dollar (GBP/AUD) exchange rate rallied last week amid a downbeat market mood and dovish central banks.
What’s Been Happening: GBP/AUD Exchange Rate Soars to Three-Year High
The Pound (GBP) opened the week on the back foot as a lack of economic data left investors mulling over the fragility of the UK economy.
Despite expectations mounting of further tightening from the Bank of England (BoE), concerns over the economic outlook for the UK sapped demand.
Making matters worse was the final manufacturing PMI data that confirmed factory activity endured the sharpest slowdown since July 2020.
The BoE then opted to meet market expectations and raised interest rates to a fresh 15-year high of 5.25%. Despite hiking by 25bps and leaving the door open to further tightening, fears over low economic growth soured moods and dragged Sterling lower.
Meanwhile, the Australian Dollar (AUD) started the week’s trade relatively supported until the Reserve Bank of Australia (RBA) defied expectations and opted to leave domestic interest rates unchanged.
Elsewhere, a risk-averse market mood took hold, amid mounting fears of a global slowdown. The risk-sensitive ‘Aussie’ succumbed to downbeat sentiment and began to slide further.
A string of underwhelming data releases then pulled the Australian Dollar to multi-year lows to close the week out as domestic retail sales, services PMI, and trade data all disappointed.
Three Things to Watch Out for This Week
- UK GDP
The UK will publish its latest GDP figures this week. If the UK economy stalled in the second quarter as forecast, the Pound is likely to weaken.
- Australian Consumer and Business Confidence
Australian business and consumer confidence will be in focus for AUD investors this week. Souring economic sentiment could dent the Australia Dollar.
- Risk Sentiment
With concerns over global economic growth, as well as China’s stuttering economic recovery post-Covid, souring market sentiment could keep the riskier ‘Aussie’ under pressure.
Pound Australian Dollar Forecast
With only sporadic GBP and AUD data releases scheduled for this week, its likely we may see the Pound Australian Dollar exchange rate take some cues from external data. The latest US inflation release could trigger some sharp movement on Thursday