Pound Australian Dollar Exchange Rate Slips amid Risk-On Sentiment
The Pound Australian Dollar (GBP/AUD) exchange rate has been losing ground since the opening of today’s session following the gains achieved at the close of Friday. This is due to AUD investors favouring the risker asset as borders open sooner-than-expected.
At the time of writing, the GBP/AUD exchange rate is rangebound trading at around AU$1.8874.
Pound (GBP) Mixed as CBI Downwardly Revises Growth Forecasts
The Pound (GBP) is down against many of its peers this morning in response to downwardly revised growth forecasts.
The Confederation of British Industry (CBI) revised its growth forecasts down to 6.9% for this year, from its previous prediction made in June of 8.2%, as well as reducing its 2022 forecast from 6.9% to 5.1%.
Jon Holt, the chief executive of KMPG UK, said:
“Long-term economic growth remains reliant on the UK’s ability to increase productivity, decrease uncertainty and give businesses the confidence they need to invest.
We need to create the conditions to accelerate companies’ investment in technology and power the UK’s recovery.”
GBP is further limited due to the ongoing supply chain issues caused by Covid-19, rising costs, and staff shortages.
BDO, a British accountancy firm, found that 80% of medium-sized businesses are expecting their end of year trade to be negatively affected by the bottleneck supply issues and increasing costs, including energy and fuel.
Ed Dwan, partner at BDO, said:
“Following a year of disruption, many businesses will have been hoping for a strong finish to 2021 and a fresh start for 2022.
“The harsh reality is that continued supply chain issues, rising energy prices and increasing costs means that many are taking further drastic measures to stay afloat. These issues could also be further exacerbated by the new COVID-19 variant.”
Meanwhile, the release of November’s construction PMI has exceeded expectations and has printed at 55.5, higher than the previous 54.6 and considerably higher than the forecast 54.2.
This demonstrates increased expansion amongst construction activity, reaching a three-month high.
Australian Dollar (AUD) Rises as Risk Appetite Improves
The Australian Dollar (AUD) is on the front foot this morning against GBP and is rising against many of its peers.
AUD investors are optimistic in response to Queensland’s announcement that borders will reopen five days earlier than initially planned, nearly five months since the restrictions were implemented.
Annastacia Palaszczuk, Premier of Queensland, said:
“Tragically, we’ve lost seven lives. But the results have been really unprecedented compared to the rest of the world. Our businesses have been able to function. Our children have gone to school. And we’ve fought back and contained more than 50 separate outbreaks.
“And I’m very conscious that we want to give people certainty. We want to give families certainty, and business certainty.”
AUD is likely to remain improving due to the Queensland reopening tailwinds for the rest of today’s European session.
Moreover, as a proxy to the Chinese economy, AUD exchange rates have benefitted from the People’s Bank of China (PBOC) cutting banks’ Reserve Requirement Ratio (RRR) for the second time this year in a move that aims to alleviate pressure on the Chinese economy and encourage growth.
GBP/AUD Exchange Rate Forecast: RBA Rate Decision in Focus
Looking ahead, the Pound Australian Dollar exchange rate is likely to see the most market movement influenced by headlines due to an absence of notable GBP data until the end of the week.
AUD may be negatively impacted by Reserve Bank of Australia’s (RBA) dovish comments, with expectations for the central bank to leave interest rates unchanged.
Chinese trade data for November may also limit AUD strength, with the country’s trade surplus expected to fall back slightly from October’s record high to $82.75 billion.
On the other hand, the ‘Aussie’ may continue gaining tonight following the release of November’s Australia Performance Services Index which forecast an increase from 47.6 to 53, predicting an improvement for the fourth consecutive month.
However, GBP is likely to be impeded by a lack of data, causing influence to come from headlines surrounding Omicron, Brexit and Bank of England interest rate hike expectations.
The Pound may come under further pressure on Friday as UK GDP growth for October is forecast to have slowed to 0.5% in October, down from 0.6% in September.