Pound Australian Dollar (GBP/AUD) Weakens amid UK Economic Worries
The Pound Australian Dollar (GBP/AUD) exchange rate is continuing to struggle today as UK petrol shortages continue fuelling UK economic growth concerns.
Although reports suggest fuel supplies appear to be stabilising, the GBP/AUD exchange rate is slipping, down approximately 0.2% so far today at AU$1.8642.
Pound Slides as UK Government Looks to Stabilise Fuel Crisis
GBP exchange rates are suffering a second day of losses today as fuel supplies in the UK begin to stabilise, although supply issues appear to remain.
The UK government has taken steps to resolve the crisis this week. Following its decision to relax competition laws and issue emergency visas for overseas workers to fill a labour shortage, Business Secretary Kwasi Kwarteng today said the army would drive tankers to deliver fuel.
Kwarteng said:
“It takes a couple of days, sometimes a few days to get troops on the ground.
“We’ve decided to do that and I think in the next couple of days, people will see some soldiers driving the tanker fleet.
“We’ve seen large queues but I think the situation is stabilising. We’re getting petrol into the forecourts and yesterday that was matched by the sales.”
Despite the fuel crisis appearing that it will ease through this week, concerns over the UK economy and stagflation persist.
Some economists fear increasing inflationary pressure, supply chain frailty, staff shortages, and difficult conditions for UK businesses will cause UK economic growth to slow, which in turn will likely weaken the Pound.
Australian Dollar Strengthens as Market Sentiment Cautiously Improves
The risk-sensitive Australian Dollar is making gains against a number of its peers today as market risk appetite has improved after yesterday’s sharp selloff.
AUD exchange rates slipped as factory production stopped during power outages in China, the energy crisis in Europe mounts, and the Chinese property giant Evergrande crisis spooked investors and triggered a global risk averse mood, weighing on the risk-sensitive ‘Aussie’.
However, the AUD/GBP exchange rate has been able to continue making gains due to the UK’s fuel crisis weakening the Pound.
Risk appetite appears to have increased today and cautious optimism has allowed the Australian Dollar to make modest gains against other major currencies.
Additional support for AUD exchange rates has come from Australia’s vaccination rollout nearing the country’s target levels of 70-80% and the announcement that monetary support will be reduced.
Australian Treasurer Josh Frydenberg commented:
“Right now the commonwealth is providing more than a billion dollars of taxpayer money each and every week it’s supporting around one and a half million people, and that emergency payment needs to come to an end.
“If you look around the world, people are starting to get about their normal lives. They’re learning to live with the virus in a COVID-safe way.
“As our vaccination rates hit 70 and 80 per cent, we need to do that as well.”
Pound Australian Dollar Forecast: UK Economic Outlook to Drive GBP Movement
The UK economic growth outlook looks set to continuing driving movement in the Pound.
With supply chain issues, increasing inflationary pressure, and staff shortages likely to continue for some time, insight from Bank of England (BoE) Governor Andrew Bailey in a speech today could stoke volatility.
More detail from Bailey on the BoE’s forward guidance and monetary policy tightening – against the backdrop of rising inflation – the central bank signalled last week may drive additional movement in Sterling.
Meanwhile, AUD exchange rates could come under pressure on economic news from China. Manufacturing data due overnight is expected to show factory output growth contracted again in September, potentially denting the ‘Aussie’ due its proxy status to the Chinese economy.