GBP/AUD Exchange Rate Subdued as EU Proposal Awaited
(Updated 16:30, 13/10/2021) The Pound Australian Dollar exchange rate ticked down through this afternoon’s session as headwinds emerged over the UK’s Northern Ireland protocol. In a tweet yesterday, the Prime Minister’s former advisor Dominic Cummings announced that the UK government always intended to ‘ditch’ the protocol as it stands.
Cummings’ comments echo those made by Steve Baker, then chair of the European Research Group of backbench MPs. Last year, Baker wrote in the Critic that Mr Cummings ‘said we should vote for the original withdrawal agreement without reading it, on the basis Michael Gove articulated: we could change it later.’
Yesterday’s comments have alarmed former taoiseach Leo Varadkar, who negotiated the Northern Ireland protocol with Johnson at a meeting in in October 2019. Varadkar responded:
‘If the British government doesn’t honour its agreements, doesn’t adhere to treaties it signs, that must apply to everyone else too… The message must go out to all countries around the world that this is a British government that doesn’t necessarily keep its word.’
The dispute is poorly-timed, as Maroš Šefčovič, European Commission Vice President of Interinstitutional Relations and Foresight, will deliver the EU’s proposal on the Northern Ireland Protocol at 1630 GMT this afternoon. Reports of the government’s alleged behaviour could damage UK credibility in the eyes of the commission.
Original article continues below:
Pound Australian Dollar Exchange Rate Firms Slightly as UK GDP Climbs
The Pound Australian Dollar (GBP/AUD) exchange rate has risen this morning, as UK GDP rose for the month of August, although falling slightly short of estimates. In Australia, Westpac consumer confidence missed expectations, falling by 3.5% in October.
At the time of writing, GBP/AUD is trading at A$1.8542, slightly above today’s opening levels.
Pound (GBP) Climbs on Upbeat GDP
The Pound (UK) lifted against the majority of its peers this morning as a rise in GDP buoys trading sentiment.
Despite missing expectations by 0.1%, the data has been widely regarded as positive, as the UK services sector drives growth, with restaurants and hotels attracting more custom alongside arts and entertainment.
Gains have been somewhat capped by concerns over September’s forecasts, as supply chain constraints and labour shortages are expected to exert downside pressure.
According to Susannah at Hargreaves Landsdown:
‘It’s likely that the 0.4% growth in economic output overall in August was partly put due to the mini bounce back from the pingdemic… price rises, fuel shortages and labour shortages are potholes in the road which are likely to have put a brake on growth in September.’
A contraction in the construction sector is also of concern, as growth shrank for the fourth month in a row. Raw material shortages are thought to have driven the contraction; analysts warn that drags may become more widespread and significant over the next couple of months as the fuel crisis prevents some people from getting to work.
Experts at the National Institute of Economic and Social Research predict a ‘two-speed’ recovery, with sectors most affected by shortages in decline, while others continue to recover:
Australian Dollar (AUD) Resists Downside despite Weaker Consumer Confidence
The Australian Dollar (AUD) is managing to resist significant downside pressure this morning, despite lower-than-expected consumer confidence in the month of October.
The Westpac-Melbourne Institute Index of Consumer Sentiment for Australia fell by 1.5% month-on-month to 104.6, as worries over the longer-term economic outlook overshadowed relief from the loosening of Covid-19 restrictions.
Westpac Chief Economist Bill Evans reported that sentiment had improved in Sydney and Melbourne, but fell sharply elsewhere as survey respondents were cautious that inter-state travel could result in more infections.
While Covid cases in New South Wales decline as 50% of residents achieve double-vaccination status, recovery in the state of Victoria is more tenuous. Melbourne’s northern suburbs recorded 527 new cases yesterday, as Health Minister Martin Foley announced that public hospitals would only be performing urgent surgeries from tomorrow.
Also applying downside pressure, the Reserve Bank of Australia (RBA) is maintaining a cautious policy stance, affirming that rates are likely to be on hold until 2024. Policymakers observed earlier this month the timing and pace of the economic rebound in Australia are uncertain and will depend upon the easing of restrictions.
GBP/AUD Exchange Rate Forecast: AU Employment Data to Influence Direction?
The Pound Australian Dollar exchange rate is likely to find direction tomorrow morning as jobs data from Australia is due to reveal ongoing obstacles to hiring and jobs creation.
Australia’s unemployment rate is expected to increase, with employment to drop by approximately 137.5k. If the data prints as anticipated, AUD could face headwinds.