Pound Australian Dollar (GBP/AUD) Exchange Rate Spikes 1.1% as ‘Aussie’ Tumbles on Trade Fears

GBP/AUD Exchange Rate Surges as Australia’s GDP Figures Slip

The Pound Australian Dollar (GBP/AUD) exchange rate surged today, and is currently trading at AUD$1.7480, after it was revealed Australia’s GDP figures had dropped significantly.

Sterling was buoyed yesterday by the release of November’s construction PMI figure, which showed a better-than-expected increase, however, it later fluctuated wildly after a series of Brexit developments.

The first was the European Court of Justice’s announcement that Article 50 could be unilaterally revoked by the UK, which was cheered by Sterling investors.

Later in the day, however, the Pound fell back after a successful contempt of Parliament challenge by MPs to make amendments to any EU withdrawal agreement that fails to pass a first parliamentary vote, thus likely avoiding a ‘no-deal’ Brexit, but heightening the sense of political chaos.

GBP/AUD Exchange Rate Buoyed Despite Weak Car Sales Figures

This morning the Pound (GBP) was under pressure after the release of new car registration figures revealed a fall of -3% in October.

Some observers blamed the slide on Brexit-related factors, with Mike Hawes, Chief Executive at the Society of Motor Manufacturers and Traders, commenting:

‘It’s now critical that a Brexit deal is secured to boost consumer confidence and provide a stimulus to the new car market as we enter the New Year.’

GBP was further weakened by the release of today’s services PMI for November, which showed a significant decrease on October’s figure, with a figure of 50.4 meaning the UK’s largest sector is hovering just above contraction level.

Australian Dollar Pound (AUD/GBP) Exchange Rate Sinks as US-China ‘Truce’ Bubble Pops on Trump Tweet

The ‘Aussie’ was hit by today’s release of the GDP figures for the third quarter, which showed 0.3% growth – a significant 2/3 drop over Q2’s 0.9% rate – dampening market confidence in the Australian economy.

Paul Dales of Capital Economics commented:

‘It would be tempting to blame the slowdown in GDP growth in the third quarter on temporary factors, but we believe that the full effects of falling house prices and tighter credit conditions haven’t been felt yet.’

This has caused concern, with some analysts even predicting a rate cut from the Reserve Bank of Australia (RBA).

AUD has also further struggled with increasing scepticism over the US-China ‘truce’ catalysing a weakening in the ‘Aussie’, as US President Donald Trump seemed to confirm in a tweet suspicions that not much had changed in US-China relations:

GBP/AUD Outlook: Australian Trade Balance and Consumer Spending in the Spotlight

The GBP/AUD exchange rate is expected to be driven by Brexit-related developments in the coming week, as Theresa May gears up to gain support for her UK-EU withdrawal agreement, despite mounting headwinds.

Tomorrow sees the release of Australia’s retail sales figures for October, with investors paying close attention to any increase that could signify a healthy Australian economy.

However, the recent drop in GDP has dampened the ‘Aussie’, with the Reserve Bank of Australia (RBA) having formerly predicted a growth rate of 3.5% – now slashed to 2.8%.

This is causing concern for AUD investors, as it raises questions about future interest rate hikes, potentially weakening market confidence in the ‘Aussie’.

Tomorrow also sees the release of October’s Australian trade balance, with an expected increase potentially providing a leg-up for AUD.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron