Pound Australian Dollar Exchange Rate Weekly Forecast: GBP/AUD Slumps as UK Recession Risks Rise

The Pound Australian Dollar (GBP/AUD) exchange rate traded erratically last week before sliding as fears over the UK economy sapped demand.

What’s Been Happening: GBP/AUD Exchange Rate Drops

The Pound (GBP) started the week on the back foot as a cheery market mood was offset by mounting recession fears.

However, the growing policy divergence between the Bank of England (BoE) and other central banks lent some support to Sterling. Expectations of further tightening buoyed GBP investors.

But pressure soon resumed as the latest UK consumer credit data incited a mixed reaction. Despite a modest fall in spending, the figure remains elevated amid the ongoing cost-of-living crisis.

A speech from BoE Chief Economist Huw Pill failed to lift the Pound despite reiterating the need to bring inflation down. The prospect of keeping monetary policy sufficiently restrictive longer than expected weighed on Sterling.

Mounting fears over the fragility of the UK economy then kept a firm lid on the Pound as the week ended.

Meanwhile, the Australian Dollar (AUD) also traded in volatile market conditions throughout the week.

The ‘Aussie’ found moderate support through an upbeat market mood but soon slipped following a sharp cooldown in consumer price inflation (CPI).

Better-than-expected Chinese data sent the Australian Dollar higher as China’s manufacturing sector expanded for the first time since February.

At the end of the week a more cautious market mood capped gains for the ‘Aussie’, but it still headed into the weekend on the front foot against the Pound.

Three Things to Watch Out for This Week

  1. RBA Interest Rate Decision

The Reserve Bank of Australia (RBA) is expected to keep rates on hold this month. However domestic inflation remains high and a surprise rate hike could boost the ‘Aussie’.

  1. Australian GDP Growth Rate

The Australian economy is expected to have grown for a seventh consecutive quarter, potentially boosting the Australian Dollar.

  1. UK Services PMI

A confirmed contraction in the vital services sector could drag Sterling down amid sluggish domestic demand and waning economic confidence.

Pound Australian Dollar Forecast

Elsewhere, market sentiment will continue to play a major role in GBP/AUD movement this week. If global slowdown fears grow, the riskier ‘Aussie’ could slip.

Danny Tingle

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