Pound Australian Dollar Exchange Rate Stumbles as Australian Borders Open Up

(Updated 16:50 22/11/21)

The Pound Australian Dollar (GBP/AUD) exchange rate has dropped slightly but continued to trade within a limited range today.

At time of writing the GBP/AUD exchange rate is at around $1.8533, which is down -0.34% from this morning’s figures.

Pound Australian Dollar (GBP/AUD) Exchange Rate Dips as Australia Re-opens Borders

The Pound Australian Dollar (GBP/AUD) exchange rate dipped overnight, as the Australian Dollar (AUD) was boosted by the announcement that the country is reopening its borders to international travel. The rate has since stabilised and has traded within a narrow range today.

At time of writing the GBP/AUD exchange rate is at around $1.8523, which is down roughly 0.4% from this morning’s figures.

Australian Dollar (AUD) Boosted by Announcement of International Travel

The Australian Dollar (AUD) rose overnight amid more risk-on trading for the currency, as Prime Minister Scott Morrison announced that they country would be re-opening its borders to international travel next month.

The move is expected to provide a significant boost to the Australian economy, as the return of foreign students is expected to bring in around A$35 billion alone.

Renewed international travel is also forecast to help ease the country’s labour shortages which were otherwise a potential threat to Australia’s economic recovery. Jennifer Westacott, chief executive of industry body the Business Council agreed with this sentiment:

“This will be critical relief for businesses who are struggling to find workers just to keep their doors open and for those who need highly specialised skills to unlock big projects.”

The slowly recovering price of iron ore may also affect movement of AUD today. The Chinese property sector, a key influencer of the price of iron ore, has seen recovery recently as debt-laden developer Evergrande has resumed production on 63 projects.

Pound (GBP) Dips as Economic Growth Forecast to Slow

The Pound (GBP) is trending downward against its riskier competitors this morning despite hitting a 21-month high against the Euro (EUR).

Confidence in Sterling may have been affected by forecasts this morning that predict a slowing of the country’s economic growth. Forecasts are now for GDP to rise by 6.9% versus the 7.6% from forecasts this summer.

Economic forecaster EY Item Club has warned that rising energy prices, continuing supply chain disruptions, and longer lasting inflationary pressures are likely to hamper the UK’s economic recovery. Despite this, the 6.9% growth still represents the country’s best year since 1941 as the UK continues to recover from the COVID-19 pandemic.

Martin Beck, chief advisor at EY Item Club, also felt that were was still for optimism in these forecasts:

‘Despite these challenges, the UK economy has made some significant progress in regaining pandemic-related losses and the recovery is far from out of steam. Looking at the big picture, the economy has recovered much faster than was expected at the start of this year.

Clear grounds for economic optimism remain too. While not every household has been able to save more over the last year or so, the build-up of household savings means consumers are in a good position overall. Meanwhile, the labour market is healthy and businesses have built up robust balance sheets. Long-term economic scarring from the pandemic is likely to be minimal.’

GBP/AUD Forecast: PMI Performances to Influence Both Currencies?

Looking forward to the week ahead, both the UK and Australia will release significant data in the form of PMIs for November. Australia’s PMIs are due to be released on Monday evening, with forecasts currently showing a rise of economic activity across all sectors. This is likely to drive further movement in the Australian Dollar.

Figures for Australia’s October retail sales are forecast to show a rise of 2.5%, which could provide a further boost to the ‘Aussie’ later in the week.

The UK’s PMIs are forecast to report a slowing of growth in the UK’s private sector, which could well prompt fresh movement in the Pound. If this data prints as forecast, then investors could alter their bets for an interest rate hike from the Bank of England (BoE).

BoE Governor Andrew Bailey will  give a speech on Thursday. Bailey has previously been inconsistent when it comes to hints on the central bank’s monetary policy, so fresh comments from him could well drive Sterling’s movements.

Gareth Monk

Contact Gareth Monk