Pound Australian Dollar (GBP/AUD) Unable to Hold Onto Gains as Energy Bills Rise
(Updated 16:30, 01/04/2022) The Pound Australian Dollar (GBP/AUD) exchange rate firmed slightly this afternoon, only to resume its downtrend as Sterling sentiment weakened.
A series of bills increased for British consumers today, including energy tariffs, as the long-awaited rise in the energy price cap came into effect: the average household dual fuel tariff jumped from £1,278 to £1,971 overnight.
Analysts at Cornwall Insight, who predicted the price cap within a 3% margin of error, said they expect the next price cap increase to result in an average jump to £2,599.92.
Such is the pressure on UK households that the general secretary of the Trades Union Congress called for an emergency budget from Chancellor Rishi Sunak, to address the cost-of-living crisis.
Frances O’Grady said:
‘People shouldn’t be struggling to cover the basics but millions of families have been pushed to the breaking point by spiraling bills and soaring inflation. This is a living standards emergency… We need a proper package of economic support.’
As snow and hail fell across the UK this week, families and pensioners spoke of having to turn off the heating and disconnect broadband to afford the cost of food – Citizens Advice warned that the number of people unable to pay for energy would rise to one in four across the UK, if the energy cap rises as forecast in October.
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GBP/AUD Exchange Rate Weakens as AU Manufacturing Impresses
The Pound Australian Dollar (GBP/AUD) exchange rate has tumbled this morning as Australian Dollar (AUD) sentiment is buoyed by strong manufacturing data, while the Pound (GBP) sinks on geopolitical headwinds.
At the time of writing, GBP/AUD is trading at A$1.7481, down 0.4% from today’s opening levels.
Australian Dollar (AUD) Receives Boost from Impressive Manufacturing Data
The Australian Dollar is climbing against its peers this morning, as yesterday evening’s manufacturing data impressed to the upside.
The Ai group manufacturing index for the month of March revealed an increase in manufacturing activity, printing at 55.7 rather than the 53.5 expected. Meanwhile, the S&P global manufacturing PMI came in at 57.7 rather than the 57.3 forecast.
According to the S&P report, manufacturing sector growth was supported in March by robust demand conditions, despite a renewed rise in COVID-19 cases and domestic flooding disruptions; Innes Willox of the Ai Group added:
‘The Australian manufacturing sector grew faster in March as manufacturers added new staff, lifted sales and continued to expand production… There was an encouraging rise in new orders in March although with labour and input supply constraints growing, manufacturers will be stretched to fill orders in a timely way.’
Also supporting the ‘Aussie’ are forecasts of continuing higher prices for energy sources, with countries looking to source fuel outside of Russia.
Rabobank analysts report:
‘There are questions about how much additional LNG Australia could supply to Europe without breaking existing contracts… higher prices for alternative energy sources [are] likely to maintain support for currencies such as the AUD.’
Pound (GBP) Subdued by Market Mood, Manufacturing PMI
The Pound (GBP) has tumbled this morning as weak risk appetite dampens appeal for the currency, alongside a disappointing manufacturing report.
Russian President Vladimir Putin announced on Thursday that buyers of Russian gas ‘must open Rouble (RUB) accounts in Russian banks’ to execute purchases from April 1: as several European nations rejected Putin’s demand, the President warned that there would be consequences.
Meanwhile in Ukraine, Russian forces continue to prevent humanitarian aid from reaching the besieged city of Mariupol. According to an aide to the city’s mayor, Petro Andryushchenko:
‘The city remains closed to entry and very dangerous to exit with personal transport… since yesterday, the occupiers have categorically not allowed any humanitarian aid – even in small quantities – into the city.’
In the UK, finalised manufacturing data failed to meet the expected forecast of 55.5: March’s S&P global manufacturing PMI printed instead at 55.2.
According to Markit Economics, today’s reading points to the lowest growth in factory activity since February of 2021, as manufacturers indicate that ongoing supply shortages, greater caution among clients, escalating inflationary pressures and geopolitical tensions all hampered the upturn in activity.
Pound Australian Dollar Exchange Rate Forecast: Australian Retail Sales to Influence Trading?
Looking ahead, Australian retail data may affect the Pound Australian Dollar exchange rate on Monday, as finalised figures are expected to show a 1.8% increase in sales on a monthly basis.
If the data prints as expected, AUD could enjoy tailwinds – however, if tensions in Ukraine continue to escalate and Russia’s relationships with other countries also begin to fray, risk-off trading could suppress demand for the risk-sensitive ‘Aussie’.