Pound Australian Dollar (GBP/AUD) Slips as Energy Crisis Concerns Weigh on GBP
The Pound Australian Dollar (GBP/AUD) exchange rate is slipping so far today as the threat of an energy crisis in the UK weighs on Sterling, while the ‘Aussie’ is buoyed by lockdown easing in New South Wales.
GBP/AUD has trended lower since the middle of last week, with the pairing shedding approximately 0.3% this morning to trade at 1.8563 at the time of writing.
Pound (GBP) Limited by Business Energy Price Concerns
The Pound (GBP) is continuing to come under pressure today from soaring energy prices that are threatening to cause shutdowns in some UK industries.
Wholesale gas prices have surged 250% since January, leading to higher bills for consumers and soaring costs for businesses.
Industries suffering from rising energy costs are appealing to the UK government amid fears of potential shutdowns in heavy industry sectors such as ceramics and steel manufacturing.
However, speaking at the weekend Business Secretary Kwasi Kwarteng refused to commit to government help for struggling businesses and industries, despite describing the situation as ‘critical’.
“We are not in the business of bail-outs. What we are in the business of is ensuring security of supply and that is what I am focused on.”
The Pound has received support from recent comments from Bank of England (BoE) policymakers who have hinted at tightening monetary policy.
Following BoE chief economist Huw Pill’s warning over rising inflationary pressure last week, Governor Andrew Bailey and Monetary Policy Committee member Michael Saunders both hinted at earlier interest rate rises.
Bailey said inflation will likely head higher and managing the impact on the economy is a ‘very delicate and challenging job.’
In an interview with the Telegraph, Saunders said:
“I’m not in favour of using code words or stating our intentions in advance of the meeting too precisely. The decisions get taken at the proper time.
“But markets have priced in over the last few months an earlier rise in Bank rate than previously and I think that’s appropriate.”
Australian Dollar (AUD) Buoyed by Lockdown Easing
The Australian Dollar (AUD) is enjoying strong support during today’s European session as New South Wales comes out of lockdown.
After almost four months, Sydney and New South Wales have relaxed restrictions for fully vaccinated people, with a 74% rate of double-dose vaccinations in those over 16 in Australia’s most populous state.
Optimism over more of the Australian economy reopening and foreign travel beginning again soon has boosted AUD exchange rates.
With Canberra due to exit lockdown on Friday, and Melbourne and Victoria late October, Australia’s economic outlook could continue improving.
Victoria health minister Martin Foley said:
“We can announce that with Victoria preparing to open in time for summer, based on our implementation of the national plan for reopening, we’ll also be launching today a new campaign to remind everyone that your vaccination is your ticket…
“Dine in, sport, travel, work, but perhaps most importantly of all, reconnecting with family and friends and those we love. As they announced as part of the Victorian roadmap to deliver the national plan and to protect the community and the health system, we know that the safest way to do that is to apply those measures to Victorians who are vaccinated.”
Meanwhile, rising copper prices are also supporting the commodity-linked ‘Aussie’.
Pound Australian Dollar Forecast: UK Employment Data to Support GBP
High-impact economic data is set to drive movement in the GBP/AUD exchange rate through this week.
UK employment data released tomorrow could support Sterling, with the unemployment rate set to drop from 4.6% to 4.5% and wage growth set to be up 7% year-on-year in August. The figures could provide the BoE with more reason to tighten monetary policy soon.
GDP data for August may also cause the Pound to fluctuate. With forecasts of 0.5% growth in August, any upside surprises would benefit Sterling.
At the same time, the Australian Dollar could face some headwinds from data releases, with business confidence set to remain low and September’s unemployment rate expected to rise from 4.5% to 4.8%.
However, consumer confidence is expected to tick higher, likely lending support to AUD exchange rates.