Pound Australian Dollar Exchange Rate Stumbles on Stronger-than-Expected Australian GDP Figures

Pound Australian Dollar (GBP/AUD) Exchange Rate Dented by Australian GDP Release 

The Pound Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning, after Australia’s latest GDP release printed above expectations. 

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8611, down roughly 0.3% from this morning’s opening levels. 

Australian Dollar (AUD) Buoyed as Domestic GDP Shrinks Less than Expected 

The Australian Dollar (AUD) is trending higher against the Pound (GBP) and the majority of its other peers this morning, after Australia’s latest GDP figures beat forecasts. 

According to data published by the Australian Bureau of Statistics (ABS), domestic growth slumped from 0.7% to –1.9% in the third quarter as a result of the lockdown measures in place at the time. However this beat forecasts GDP would tumble to –2.7%. 

The stronger-than-expected GDP figures have fueled speculation that the Reserve Bank of Australia (RBA) might be willing to raise interest rates before 2024. 

Lee Sue Ann, an Economist at UOB Group, suggests: 

‘We expect the current Quantitative Easing (QE) program to continue until February 2022. We now also flag the potential for rate hikes to come earlier than our initial projection of early 2024. We are now looking at rate hikes beginning in Q4 2023.’ 

Also helping to buoy the Australian Dollar this morning is an apparent improvement in market risk appetite, as the absence of any additional negative developments regarding the Omicron Covid variant appears to have calmed investors, following yesterday’s panic induced selloff

Pound (GBP) Muted amid Ongoing Brexit Uncertainty 

At the same time, the Pound (GBP) is trading in a narrow range so far this morning, as Sterling sentiment is undermined by ongoing Brexit uncertainty. 

Despite talk of the UK softening its stance in recent weeks, negotiations regarding the Northern Ireland protocol remain deadlocked, and look likely to run into 2022. 

The UK government has previously warned it could trigger Article 16 of the protocol is no progress is made, a move which analysts fear could result in a UK-EU trade war. 

While government officials have walked back this threat, the possibility of such an action remains a key concern for GBP investors. 

Pound Australian Dollar Forecast: BoE Bailey in the Spotlight 

Still to come today, is a scheduled speech by Bank of England (BoE) Governor Andrew Bailey, which is likely to act as a key catalyst for the Pound Australian Dollar exchange rate later this afternoon. 

GBP investors will be paying close attention to Bailey as he is likely to comment on how the Omicron Covid variant may influence the BoE’s stance on monetary policy, with Sterling poised to fall if he indicates the BoE will likely play it safe at its December policy meeting by leaving interest rates on hold.  

Meanwhile, the Australian Dollar could strengthen later tonight as Australia publishes its latest trade balance. 

While economists forecast Australia’s trade surplus will have narrowed in October, the reading is also expected to the contraction of export growth also slowed, which could reflect positively on the ‘Aussie’. 

Matthew Andrews

Contact Matthew Andrews

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