Pound Australian Dollar Subdued as UK ‘Stagflation’ Concerns Limit GBP

Pound Australian Dollar (GBP/AUD) Muted as Sterling Struggles Continue

The Pound Australian Dollar (GBP/AUD) exchange rate is edging slightly higher this morning after shedding some of Thursday’s European session gains overnight.

Sterling halted its recent run of losses yesterday and GBP/AUD is trading at AU$1.8668 so far today, still down 2 cents on the week’s opening level.

Pound (GBP) Limited on Persisting Growth Concerns

The Pound is struggling for support at the start of today’s session after September’s finalised manufacturing PMI.

Growth in the sector slowed to its slowest rate since February to 57.1, down from August’s 60.3, although the reading did beat initial estimates.

The slowdown comes amid UK growth worries. Rob Dobson, Director at IHS Markit commented:

“The September PMI highlights the risk of the UK descending towards a bout of ‘stagflation’, as growth of manufacturing output and new orders eased sharply while input costs and selling prices continued to surge higher.

“Companies are facing a growing list of headwinds, which includes declining new export orders, component shortages, delays to air, land and sea freight, staff shortages exacerbated by COVID-19 illnesses, Brexit disruptions, sharply rising costs and now fuel shortages.”

Concerns over the UK economy stemming from petrol shortages, the energy crisis, and supply chain issues are continuing to hang over the Pound today.

According to reports, petrol shortages are ongoing across the UK as the crisis enters a second week.

Meanwhile, the 12% energy price cap rise takes effect in the UK today, pushing up costs for businesses and consumers.

As wholesale gas prices soar, another announcement that prices will rise is expected next week.

Australian Dollar (AUD) Struggles amid Cautious Mood

The Australian Dollar is lacking direction at the end of the week amid a cautious market mood.

Energy prices surging in Europe, the Chinese government ordering state-owned energy companies to secure fuel supplies amid a power outages, and global supply chain issues are souring market mood that are in turn weighing on the risk-sensitive ‘Aussie’.

AUD exchange rates have also come under pressure as manufacturing PMI data for September missed forecasts.

The Ai Group index pointed to the slowest growth in factory activity since a contraction in September last year. Meanwhile, the Markit survey indicated solid growth on August’s reading but was downwardly revised from initial estimates.  

However, the Australian Dollar is making modest gains after the Australian government announced the borders would reopen for the first time during the pandemic in November.

Australians will be able to travel for the first time since March 2020 if their state’s vaccination rate hits 80%.

The news has boosted optimism and hopes for economic recovery, in turn supporting AUD.

GBP/AUD Forecast: Will the Fuel Crisis Continue Weighing On the Pound?

The Pound Australian Dollar exchange rate could continue to struggle going into next week as UK growth concerns resulting from supply chain, energy and fuel shortage crises limit Sterling.

With the effect of Furlough scheme ending in the UK on Thursday still unknown, the Pound could come under pressure when the picture becomes clearer if those that were using the government programme struggle to find employment.

Meanwhile, the Australian Dollar could be subdued ahead of the Reserve Bank of Australia’s (RBA) rate decision on Tuesday.

Australian services PMI data released on Monday will likely weigh on the ‘Aussie’, with another contraction in the sector expected in September while many states were under lockdown.