Pound To Australian Dollar Weekly Forecast, News: PMIs To Drive GBP/AUD Volatility?

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The Pound to Australian Dollar exchange rate may dip this week if strong AU PMIs boost the Aussie, although potential RBA rate cut bets from easing AU inflation could weaken AUD. GBP/AUD traded in a wide range last week amid a shifting market sentiment and mixed data releases. The pairing closed Friday’s session at around AU$1.9351. On Tuesday, the UK’s latest jobs data sparked GBP volatility. Unemployment rose more than expected to 4.2% in February, hitting a six-month high and edging higher from the previous month’s upwardly revised 4%. Signs of a loosening labour market pressured GBP exchange rates, however, with wage growth hitting a two-and-a-half year high, confirmation that earnings are outpacing inflation served to offset GBP’s initial losses. On Wednesday, a slightly warmer-than-expected batch of inflation data saw markets dial back their Bank of England (BoE) interest rate speculations. However, accompanying commentary from BoE Governor Andrew Bailey saw policymaker’s largely shrugging off the hotter-than-forecast inflation print, affirming that the central bank remains confident that UK inflation will fall to the BoE’s target rate of 2% in the summer months. Bailey also stated that UK inflation would likely undergo a ‘sharp drop’ in April, leaving Sterling to relinquish its previous gains. Australian Dollar (AUD) strengthened as the week opened, as rising commodity prices lifted the commodity-driven ‘Aussie’. Following this, AUD then softened overnight heading into Tuesday’s session, despite a better-than-forecast Chinese GDP print. China’s economy grew more than forecast, rising by 5.3% in the first quarter of 2024. However, despite AUD’s status as a proxy for the Chinese economy, a souring market mood sapped investor interest in the highly risk-sensitive Australian Dollar. Escalating tensions in the Middle East saw investors favouring safer assets, leaving the ‘Aussie’ rudderless. Then on Wednesday, a smaller-than-expected rise in AU unemployment last month offered AUD some support. Unemployment edged higher to 3.8%, rather than jumping to 3.9%, enabling AUD to post some modest gains against its rivals. Coming up, Australia’s latest preliminary PMIs are due for release on Tuesday. Should the data print as forecast, AUD could edge higher amid signs of increased economic activity. The UK’s latest PMIs are also due to print on Tuesday. Another slowdown in the UK’s vital services sector could dampen investor interest in GBP. On Wednesday, the latest AU inflation print is then set for release. Economists expect to see headline inflation ease to 3.4%, falling from the previous quarter’s 4.1%. This could lead to ramped up Reserve Bank of Australia’s (RBA) interest rate cut bets, thereby sinking AUD.