Pound Australian Dollar (GBP/AUD) Exchange Rate Looks to Recapture Three-Year High as Australian GDP Underwhelms

GBP/AUD Exchange Rate Surges on Disappointing Australian GDP

The Pound to Australian Dollar (GBP/AUD) exchange rate is soaring higher this morning as Australia’s latest GDP figures came in below expectations.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9035, up roughly 0.8% on the day’s starting levels and just shy of the three-year high struck at the end of last week.

Australian Dollar (AUD) Tumbles as Domestic Growth Falls Short of Expectations

The Australian Dollar (AUD) is in retreat this morning, on the back of some underwhelming domestic GDP figures.

According to data published by the Australian Bureau of Statistics (ABS), the economy grew by 0.4% in the third quarter, undershooting expectations of a 0.5% expansion.

This saw annual growth at just 1.7% only marginally above the previous quarter’s 10-year low.

Perhaps most worrying for AUD investors is  the figures revealed growth was propped up by government spending and that household consumption collapsed to just 0.1%.

Marcel Thieliant, Senior Economist at Capital Economics, commented:

‘Particularly disappointing was the measly 0.1% [quarter on quarter] increase in private consumption.

‘This was the slowest increase since the global financial crisis and underlines that the government’s tax cuts aren’t providing any boost to consumer spending.’

The disappointing GDP reading has stoked expectations that the Reserve Bank of Australia (RBA) will continue to ease its monetary policy in 2020.

Thieliant adds:

‘We reiterate our forecast that the Bank will cut rates in February and April and launch quantitative easing in the second half of next year.’

Further limiting demand for the Australian Dollar is a sharp fall in market risk appetite amidst uncertainty regarding a US-China trade deal.

Pound (GBP) Soars on Favourable Polling Data

The Pound (GBP) remains in a position of strength this morning, fueled by election speculation.

The latest opinion polls show that the Conservatives remain well ahead of Labour, with a 10-12 point gap separating the two parties.

Should the Tories maintain this lead into next week then it would suggest Boris Johnson is on track to secure a sizable majority.

GBP investors hope this will allow Johnson to push through his Brexit deal as well as enact more business-friendly policies.

GBP/AUD Forecast: Narrowing Trade Surplus to Drag on the ‘Aussie’?

Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate may maintain its upward trajectory as we enter the latter half of the week, following the publication of Australia’s trade balance.

This is forecast to show Australia’s trade surplus narrowed from AU$7.1bn to AU$6.1bn in October, damping expectations for a rebound in GDP in the fourth quarter.

Meanwhile, in the absence of any notable UK economic data, Sterling sentiment will continue to be dominated by UK politics.

This should fuel further upside in the Pound so long as polling data continue to point to a landslide victory for the Conservatives.

Matthew Andrews

Contact Matthew Andrews