Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides alongside UK Business Investment

Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as UK Business Investment Falls for Fourth Quarter in a Row

UPDATE: The Pound Australian Dollar (GBP/AUD) exchange rate slipped again this afternoon, and is currently trading at an inter-bank rate of AU$1.8214.

UK Trade Secretary, Liam Fox has directed the blame for the UK’s six-year low in annual growth towards China’s cooling economy, stating:

‘Clearly there are those who believe that Brexit is the only economic factor applying to the UK economy.

I think you’ll find that the predicted slowdown in a number of European economies is not disconnected from the slowdown, for example, in China.’

Also weighing down the Pound was the latest business investment figure, which revealed investment had fallen for the fourth quarter in a row, a first since the recession in 2009.

Pound Australian Dollar (GBP/AUD) Exchange Rate Dips as UK Manufacturing Falls

The Pound Australian Dollar (GBP/AUD) exchange rate slipped following a slew of disappointing UK economic data releases, and is now currently trading at an inter-bank rate of AU$1.8250.

UK Gross Domestic Product (GDP) showed that annual growth in the UK hit a six-year low by only expanding by 1.3%.

The Office for National Statistics (ONS) stated that the figures reflected a slowdown across a number of industries, with Brexit weighing on business spending.

Despite this, Chancellor Philip Hammond emphasised that the economy continues to grow, stating:

‘The UK’s economy continues to grow and remains fundamentally strong. Growth of 1.4% in 2018 means the UK has grown every year for the past 9 years, and the OBR expects it to continue growing in every year of the forecast. The UK is currently enjoying the longest unbroken quarterly growth streak of any G7 nation.’

The UK manufacturing sector also aided the ‘Aussie’ (AUD) as it fell into a recession for the first time since the financial crisis, contracting by -2.1% in 2018.

Earlier: China-Sensitive Australian Dollar (AUD) Pressured by Trade Tensions

This morning, US officials arrived in Beijing for further trade discussions with China, with Wei Jianguo, Vice-Chair of the China Center for International Economic Exchanges, saying US-China officials have made ‘a big stride forward’, adding:

‘In the next stage, the two sides will still be subject to various global pressures. However, I believe that the two sides will be able to propose more weighty measures to solve differences in their further consultations.’

With the ‘Aussie’ still pressured from the neutral shift from the Reserve Bank of Australia (RBA) last week, this further pressure from the US-China discussions likely weighed on the currency.

Reports also suggest that there is further risk of another US government shutdown as discussions over border security in Congress have stalled.

Pound (GBP) Slips Following PM Theresa May’s Letter to Jeremy Corbyn

Earlier this morning, Prime Minister, Theresa May responded to a letter from Labour leader, Jeremy Corbyn sent last week, in which he set out his demands for a Brexit deal.

The PM said she wanted the two parties to discuss ‘alternative arrangements’ to the Irish backstop ‘as soon as possible’.

May stated:

‘It is good to see that we agree that the UK should leave the European Union with a deal and that the urgent task at hand is to find a deal that honours out commitments to the people of Northern Ireland, can command support in Parliament and can be negotiated with the EU – not to seek an election or second referendum.’

As the letter did not simply underscore May’s red lines, it could arguably not be enough to win over the Labour leader.

As ever, any Brexit news that would seem to indicate a solution to the impasse between the UK and the EU tends to boost Pound sentiment.

GBP/AUD Outlook: Will a Hawkish Carney Buoy the Pound?

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate could rise tomorrow if Bank of England (BoE) Governor Mark Carney repeats his positive tone in regard to the resilience of the UK economy in his speech tomorrow.

Brexit will also remain the main catalyst for movement, with Theresa May due to give a statement to the House of Commons on Wednesday.

Brexit Secretary, Steve Barclay will meet with EU Chief Negotiator, Michel Barnier in Strasbourg later today to discuss proposed changes to the deal, so if any significant progress is made it could see the Pound begin to recover.

Going forwards, with many investors seeing very little prospect of there being a successful trade deal reached between the US and China before the 1 March deadline, the ‘Aussie’ could slide against Sterling in the GBP/AUD exchange rate.

Millie Empson

Contact Millie Empson