Pound Australian Dollar (GBP/AUD) Exchange Rate Sheds Fresh Ground on UK Growth Warning

Pound Australian Dollar (GBP/AUD) Exchange Rate Stumbles as Moody’s Warns over UK Growth Outlook

Commentary from rating agency Moody’s saw the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate come under renewed pressure this morning.

As analysts at Moody’s warned that the UK gross domestic product could slow to 1% for the year in 2020 confidence in the economic outlook naturally diminished.

This left Pound Sterling (GBP) on the back foot against its rivals once again, with signs continuing to point towards an imminent Bank of England (BoE) interest rate cut.

A persistent lack of clarity over the likely shape of the future relationship between the UK and EU also kept GBP exchange rates under pressure at the start of the week.

Lingering doubts over the two sides’ ability to reach a fresh agreement before the end of the year left investors with little reason to favour the Pound.

GBP/AUD Exchange Rate Vulnerable to Weaker UK Wage Growth

The odds of a January BoE rate cut could pick up further on Tuesday, with forecasts pointing towards a slight easing in the latest average weekly earnings figures.

Any slowdown in UK wage growth would put additional pressure on the growth outlook, given the likely deterioration in consumer spending to follow.

Weaker levels of earnings growth would give BoE policymakers further incentive to adopt a dovish outlook, increasing the case for lower interest rates.

Unless wages show a steady acceleration in the three months of November the GBP/AUD exchange rate looks set to shed further ground.

Increasing Concern over Global Trade Outlook to Weigh on Australian Dollar

Support for the Australian Dollar (AUD) may prove limited in the days ahead, however, as worries over the global trade outlook linger.

With the US and China unlikely to see any significant progress in their next phase of trade talks before the end of the year the general sense of market risk appetite looks set to weaken.

As forecasts also point towards another month of weakening for the Westpac consumer confidence index investors could find little reason to favour the antipodean currency in the near term.

Unless Australian consumers show greater signs of resilience in the face of the global slowdown and adverse environmental conditions support for AUD exchange rates looks set to diminish.

Steady Australian Unemployment Rate Unlikely to Boost AUD Exchange Rates

Although no change is expected from December’s Australian unemployment rate, with investors anticipating a steady reading of 5.2%, this could still put some pressure on the Australian Dollar.

As the Reserve Bank of Australia (RBA) has previously expressed concern over the health of the domestic labour market any signs of loosening employment could weigh heavily on AUD exchange rates.

Unless the labour market can demonstrate evidence of tightening the RBA is likely to maintain its current cautious policy outlook, to the benefit of the GBP/AUD exchange rate.

Any softening of the unemployment rate, on the other hand, could help the Australian Dollar to push higher across the board on Thursday as the risk of an interest rate cut falls.

Louisa Heath

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