Pound Australian Dollar Exchange Rate Dips as UK GDP Stalls

Pound Australian Dollar (GBP/AUD) Exchange Rate Softens as UK GDP Slows Sharply 

The Pound Australian Dollar (GBP/AUD) exchange rate is trending lower this morning following the publication of some lacklustre UK GDP figures. 

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8736, down roughly 0.3% from this morning’s opening levels. 

Pound (GBP) Falters as Weak GDP Release  

The Pound (GBP) finds itself on the back foot against the Australian Dollar (AUD) this morning, in the wake of the UK’s latest GDP figures

According to data published by the Office for National Statistics (ONS), economic growth in the UK slowed from 1% to just 0.1% in July, missing estimates for a 0.6% expansion. 

The stalling of growth at the start of the third quarter is a worry to GBP investors, weakening the Pound Australian Dollar exchange rate, as it suggests that the UK economy won’t rebound to its pre-pandemic levels by the end of 2021 as initially thought.

Ed Monk, associate director at Fidelity International, commented:  

‘Growth of just 0.1% in July marks a significant slowdown and it’s a concern that most areas of the economy were flat across the month. It now looks like the wait for the UK to regain the ground lost since the start of the pandemic will last well into next year.’ 

Today’s GDP figures also further highlights the impact that supply constraints and staff shortages are having on the UK economy, with Monk adding: 

‘What’s concerning is that these numbers may not yet be showing the full effect of sustained supply-chain bottlenecks. The problem spans multiple sectors.’ 

Australian Dollar (AUD) Buoyed by Upbeat Market Sentiment 

At the same time, the Australian Dollar (AUD) has appreciated this morning as the risk-sensitive currency curries favour with investors amidst a more bullish market mood. 

This comes amid a notable pullback in the US Dollar (USD) as well as the news that US President Joe Biden has held a call with his Chinese counterpart Xi Jinping in an effort to reset the two-countries’ strained relationship. 

The ‘Aussie’ is also benefiting from the news that China has extended an offer to Australia to join a regional trade pact, in spite of the recent trade tensions between the two countries. 

Pound Australian Dollar Forecast: Strong UK Inflation Figures to Boost Sterling? 

Looking ahead to next week’s session, a key catalyst of movement in the Pound Australian Dollar exchange rate is likely to be the publication of the UK’s latest consumer price index. 

August’s CPI figures are expected to report domestic inflation began to accelerate again, potentially lifting Sterling sentiment as it may bolster speculation that the Bank of England could begin tightening monetary policy in the near-term. 

Also of note to GBP investors will be the UK’s upcoming jobs report, which may also be positive for GBP exchange rates if unemployment continued to fall in July. 

The publication of Australia’s own labour figures will be the focus for AUD investors next week, with the Australian Dollar likely to weaken if employment growth slowed last month.