The Pound Australian Dollar (GBP/AUD) exchange ticked down last week as the Australian Dollar (AUD) benefitted from Chinese tailwinds and the Pound (GBP) was subdued by weak data and an uncertain economic outlook.
At the time of writing, GBP/AUD is trading at A$1.7748, virtually unchanged from today’s opening levels.
The Australian Dollar (AUD) traded up against its peers last week as a relaxation in China’s Covid-19 travel restrictions sparked hopes of global economic growth. As Australia’s biggest trading partner, positive news from China invariably buoys AUD.
Economic data was thin on the ground over the Christmas period, leaving many currencies to trade on risk sentiment and external factors. Nevertheless, the ‘Aussie’ began the week climbing against the Pound as the price of Australia’s two main commodities – coal and iron ore – rose.
On Tuesday, China’s decision to scrap quarantine measures for inbound travellers and begin issuing visas to mainland Chinese citizens seeking to travel outside the country extended AUD’s gains. Chinese people rushed to book flights as some sceptics warned that Covid health risks in the country were not over yet.
Midweek, the ‘Aussie’ continued to climb through the Asian session, but faltered against the Pound during Wednesday’s European trading hours. Potentially dampening support for the currency were concerns that China’s new freedoms may spark a fresh wave of Covid-19 infections.
GBP/AUD continued to firm into Thursday as risk aversion drew investors away from the ‘Aussie’. The exchange rate softened in the European afternoon, however, as market sentiment became bullish again – although Moscow’s refusal of Ukraine’s peace plan kept traders on guard. 
At the end of the week, the Australian Dollar glanced off a 5-week high against the Pound, with economists observing the currency was ‘unfazed’ by moderate risk aversion. Hopes for an increase in China’s NBS manufacturing PMI may have helped buoy AUD.
The Pound traded in a mixed range last week, pressured overall by downbeat headlines and a lack of significant data over the Christmas period.
At the beginning of the weekly session, economists confirmed that the UK was entering a long recession, dampening Sterling appeal despite reports that the Boxing Day footfall was up on last year by almost 40%.
Extending GBP headwinds on Tuesday were comments from UK businesses regarding ongoing Brexit challenges. Furthermore, a report from the Financial Times observed that despite an increase in shoppers, Boxing Day sales were down and footfall remained below pre-pandemic levels.
In the second half of the week, GBP enjoyed a brief uptrend against the ‘Aussie’, although this may have been on account of the disproportionate effect of China’s reopening. Concerns that a fresh wave of Covid-19 may be released triggered a risk-averse mood that drew support to the Pound over perceived-riskier currencies.
Meanwhile, UK markets had domestic concerns of their own. Incoming TUC General Secretary Paul Nowak called upon Prime Minister Rishi Sunak to develop an ‘exit strategy’ from his anti-union stance as industrial action ramped up: railway workers, border force staff and public healthcare professionals all underwent strikes to protest working conditions and pay.
At the end of the week, the Pound faced further pressure from the Prime Minister’s indication that energy bill support for businesses would be halved in the near future. Downbeat economic forecasts and cooling house prices likewise weighed upon GBP exchange rates through Friday’s session.
China’s Caixin manufacturing PMI is expected to reveal a reduction in December’s activity, potentially denting the Chinese Yuan (CNY) at the beginning of this week. Subsequently, the ‘Aussie’ may weaken; although a higher print of December’s private-sector manufacturing PMI may yet occur, capping losses.
Finalised UK PMI data is unlikely to influence the Pound unless it surprises expectations: an increase in borrowing, however, could spark cost-of-living concerns if the Bank of England (BoE)’s consumer credit data prints as forecast.
Toward the end of the week, Chinese services data may boost the Australian Dollar, although the PMI is expected to remain in contraction territory. Commodity dynamics may also affect AUD trading, buoying the Antipodean currency if coal prices climb further.
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GBP/AUD 5-Day Forecast: Pound To Australian Dollar Rate Weakens As China Drops Quarantine Requirement – Exchange Rates UK
