GBP/AUD Exchange Rate Sinks, Lorry Driver Shortages Weakens UK Factory Growth

GBP/AUD Exchange Rate Sinks as Supply Chain Issues and Lorry Driver Shortages Hit UK Economy

(Update: 01/09/21 13:30) The Pound Australian Dollar (GBP/AUD) exchange rate fell by -0.3% today following the release of the latest UK factory data, which showed that supply chain issues and lorry driver shortages had limited growth in the sector. The pairing is currently trading around AU$1.87.

Mike Thornton, partner and head of manufacturing at RSM UK, commented on the data:

‘Supply chain disruption, material shortages and resource pressure hit the latest CIPS manufacturing PMI with another monthly fall from 60.4 in July, to a five-month low of 60.3 in August. The supply chain woes now go beyond a global shortage of semi-conductors, which is still having an acute impact on the sector; but other factors are at play. The shortage of lorry drivers across Europe and varying levels of vaccinations and Covid cases across the globe are also hitting logistics and supply chain management – stalling production even further.’

With signs that Britian’s economy is struggling to recover, Pound investors have become more cautious about the outlook for growth in the coming months.

Meanwhile, the ‘Aussie’ has benefited from a mixture of positive Australian GDP data and hopes of a global economic recovery, with the outlook for the world’s largest economies – US and China – looking relatively upbeat.

Original article continues below:

GBP/AUD Exchange Rate Falls, Australian Economic Growth Boosts ‘Aussie’

The Pound Australian Dollar (GBP/AUD) exchange rate fell by -0.3% this morning after the publication of the final Australian GDP data for the second quarter beat forecasts and rose by 0.7 quarter-on-quarter. The pairing is currently fluctuating around AU$1.87.

BIS Oxford Economics chief economist Dr Sarah Hunter was more cautious about the data, however, saying that it was ‘inherently backward-looking’.

Hunter added:

‘Economic activity has clearly been severely disrupted, and it is likely that the national economy will contract by around 3 per cent in the September quarter as a result.’

‘But the shift to a new COVID-normal, where there are persistent cases within the community, will make some people cautious; the recovery this time around will be drawn out into 2022.’

Nonetheless, signs of economic growth in Australia’s domestic economy has driven-up demand for the ‘Aussie’, while improving risk sentiment has also benefited the risk-averse currency.

Australia’s Covid-19 situation has limited confidence in the nation’s economic recovery, however, with ‘Aussie’ investors eyeing coronavirus developments.

Pound (GBP) Exchange Rate Sinks as UK Economic Concerns Persist

The Pound continued to struggle against the Australian Dollar today as concerns for the UK’s economic recovery persist, with fears that rising Covid-19 cases in autumn could derail the nation’s economic rebound.

Meanwhile, yesterday saw consumer credit fall by £0.042 billion in July, hinting at a downturn in consumer spending as confidence in the economy dwindles.

Raheel Ahmed, head of consumer products at Barclaycard, was more optimistic, saying:

‘July’s major sports fixtures… kept the nation in good spirits, providing more reasons to celebrate together, and giving the entertainment industry its long-awaited boost back into growth.’

‘While some sectors took a small step back as the post-lockdown ‘honeymoon’ period cooled, July was a positive month overall. However, with inflation expected to rise, it will be interesting to see how this impacts consumer spending behaviour over the coming months.’

In today’s UK economic news, the latest Markit manufacturing PMI for August beat forecasts and rose from 60.1 in July to 60.3.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, commented on the data:

‘The sector is still optimistic about business opportunities in the next twelve months but there are significant difficulties ahead as a lack of labour and skills, coupled with escalating price inflation on even basic materials dampens prospects for manufacturing for the rest of the year.’

As a result, confidence in the UK’s economy still remains largely on rocky ground, with GBP traders monitoring Covid-19 developments and eyeing possible staff shortages in the months ahead.

Pound Australian Dollar Exchange Rate Forecast: Could an Uptick in UK Services Sector Boost Sterling?

Tomorrow will see the release of the latest Australian trade balance report for July. Any further improvements in Australia’s domestic economy could further drive-up the AUD/GBP exchange rate.

However, global Covid-19 developments will still continue to influence risk sentiment. If new variants of the virus spark further concerns about more extensive outbreaks, then this would limit the appeal of the risk-averse ‘Aussie’.

Pound (GBP) traders will be looking ahead to Friday’s release of the UK Markit services PMI for last month. Could an uptick in the services sector boost Sterling?