Friday, June 10 2022

The British pound/Australian dollar (GBP/AUD) exchange rate started the week on an uptrend, only to fall as Australian business confidence far exceeded expectations and UK inflation highlighted concerns about the cost of living. At the end of the week, GBP/AUD rose again on weak AU data and hopes of a May rate hike from the bank of england .

As of this writing, the GBP/AUD pair is trading at AU$1.7650, up 0.2% from today’s opening levels.

Australian Dollar (AUD) Exchange Rates Fluctuate Based on Confidence Data

The Australian dollar (AUD) traded in a narrow range at the start of the week, suffering some losses against the British pound (GBP) as Chinese inflation came in above expectations.

As China’s CPI hit 1.5% – considerably higher than the previous 0.9% and market expectations of 1.2% – hopes the People’s Bank of China (PBOC) could ease some action aggressive short-term policy have faded.

Towards the middle of the week, the British Pound and Australian Dollar exchange rate fell as the Aussie surged against its peers following an impressive business confidence release. The NAB index hit a five-month high of 16 in March 2022, with little evidence of a negative impact from events in Ukraine.

On Wednesday, the Australian dollar gave up gains against the pound, propelled lower by weaker-than-expected consumer confidence figures. After Tuesday’s impressive NAB data, the Westpac index fell from 96.6 in March to 95.7 in April amid rising inflation, risk of rising interest rates and widespread flooding on the East coast.

Poor import data from China further stifled the AUD as lockdown restrictions continued to affect supply and demand dynamics for Australia’s biggest trading partner.

Towards the end of the week, poor employment data in Australia sent the Aussie even lower. The country’s seasonally adjusted unemployment rate stood at 4% in March 2022, unchanged from the thirteen-and-a-half-year low in February; while employment rose by 17.9,000 to a new record high, it remained below market forecast of 40,000.


Pound (GBP) exchange rates slide on soaring UK inflation

The British pound (GBP) remained subdued against the Australian dollar during the first part of the week, making minimal gains on weaker than expected UK GDP data.

Britain’s economy grew 0.1% in February, largely on the back of a 0.2% rise in the services sector and the end of ‘Plan B’ coronavirus restrictions – however, growth was lower than market forecasts of 0.3% and 0.8% in January.

The following session, the pound plummeted as UK wages were found to fall in line with inflation; While February’s unemployment rate fell slightly as expected, January employment growth figures revealed that the number of people in work in the UK rose by only 40,000 less than foreseen.

By midweek, however, the pound recouped its losses against the Aussie, despite cost-of-living concerns and headwinds from the partygate scandal. Making headlines in the UK was news that Prime Minister Boris Johnson and Chancellor Rishi Sunak were fined by the Metropolitan Police for attending illegal parties during lockdown.

Meanwhile, UK inflation has soared to 7%, worrying politicians and economists. Soaring fuel prices were in the spotlight, with average petrol prices reaching 160.2 pence per liter in March 2022, from 123.7 pence per liter a year earlier.

Towards the end of the week, the pound continued to climb, hitting a 3-week high against the Aussie. The pound’s rise was fueled by hopes that bank of england could raise interest rates again in May, given recent inflation data.

According to Thomas Pugh, economist at RSM UK, recent data showing slowing wage growth relative to consumer price inflation “will make the Monetary Policy Committee even more concerned that the recent surge in inflation high is beginning to be reflected in salaries, [giving the MPC] all the justification he needs [to raise interest rates again in May].’

GBP/AUD exchange rate forecast: Australian dollar strengthens on Chinese GDP?

Looking ahead, UK markets are expected to be quiet tomorrow as a national bank holiday precedes the Easter weekend.

However, Chinese GDP data will be released on Monday, which could inspire a move in Australian dollar exchange rates. If China’s GDP grew in the first quarter of 2022, as expected, the “Aussie” could benefit from tailwinds as a proxy for the Chinese economy.


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