(Updated 16:51 10/12/21)
The Pound Australian Dollar (GBP/AUD) has continued to show little movement today as the Pound faces continued pressure after disappointing growth figures.
At time of writing the GBP/AUD exchange rate is at around $1.8478.
Pound Australian Dollar (GBP/AUD) Exchange Rate Subdued as UK’s Growth Almost Stagnates
The Pound Australian Dollar Exchange Rate (GBP/AUD) has traded within a narrow range this morning as disappointing GDP figures for the UK place even more pressure on the Pound.
At time of writing the GBP/AUD exchange rate is at around $1.8470, virtually unchanged from this morning’s figures.
Pound (GBP) Struggles after Disappointing Growth Figures
The Pound is struggling to make headway against its rivals today after figures released by the Office for National Statistics (ONS) showed a drastic slowdown of the country’s economic growth.
GDP figures showed a rise of just 0.1% in October, well below forecasts of 0.4%, and is likely to further lessen chances of an interest rate hike by the Bank of England. Investors will have pared back speculative bets of such a move even further today which may have limited the Pound’s upward movement.
There are concerns that a lack of economic growth coupled with the recently announced ‘Plan B’ Covid-19 measures will harm businesses that were already struggling this year before news of the Omicron variant. Maike Currie, investment director at Fidelity International, had the following to say on the figures released by the ONS:
‘As we edge towards 2022, growth forecasts have been downgraded for the year ahead with GDP expected to reach just 4.2%. High levels of inflation and Omicron concerns are likely to limit consumer spending as businesses battle ongoing headwinds. With uncertainty in the air, the path ahead is becoming increasing difficult to navigate.
The Bank of England will be acutely aware that it’s harder to dig an economy out of recession, than to cool rising inflation, which makes an interest rate rise next week increasingly unlikely.’
Sterling could also see further Brexit headwinds today as France awaits a response from the UK over fishing rights. The European Union had previously marked today as the deadline for resolution of the issue, and has threatened litigation against the UK should the row continue. Expect the Pound to slip if a satisfactory agreement between the two nations is not reached.
Australian Dollar (AUD) Boosted as High Iron Ore Demand Continues
The Australian Dollar (AUD) has risen against some of its riskier rivals, as the currency continues to be boosted by an optimistic market mood.
The ‘Aussie’ is likely to continue to see a boost from the ongoing high demand for iron ore, as China stockpiles the commodity whilst ramping down steel production ahead of the Winter Olympics. There are concerns that iron ore prices are continuing to rebound despite China’s stockpiles nearing their upper limits, and a fall in commodity prices is almost certain to push the Australian Dollar down along with it.
The currencies climb may be limited however by news that Chinese property developer Evergrande has defaulted on its off-shore bond payments. Analysts have become increasingly worried over the fate of the property giant, as its fall could have knock-on effects throughout the financial world.
GBP/AUD Exchange Rate Forecast: Will BoE Surprise Investors Again and Raise Rates?
Looking ahead to next week, all eyes will be on the BoE’s interest rate decision on Thursday. Given today’s figures it’s looking increasingly unlikely that the central bank will decide to raise interest rates, although with inflation forecast to rise on Wednesday the central bank could still consider it a necessary move. Leaving rates unchanged could cause a sell-off of the Pound and prompt a fall in Sterling, although the BoE has surprised investors before.
Australia is forecast to see a rise in both consumer and business confidence on Tuesday despite fears over the Omicron variant. The country is yet to reintroduce any COVID-19 restrictions after lifting many previous measures last month, and with unemployment forecast to fall the Australian Dollar could see a boost as confidence in the Australian economy returns.