Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates
The Pound Australian Dollar (GBP/AUD) exchange rate is zigzagging today after better-than-expected Australian GDP data.
At time of writing the GBP/AUD exchange rate is trading around $1.7512, a moderate drop from this morning’s opening levels.
Australian Dollar (AUD) Supported by Positive GDP Release
The Australian Dollar (AUD) is fluctuating against the Pound (GBP) today. The ‘Aussie’ is attracting some support on the back of a positive Australian GDP release, but its gains have been capped by underwhelming data from China.
Australia’s economy continued to expand in the first quarter of 2022. While the pace of expansion slowed from an upwardly revised 3.6% to 0.8% in the first quarter, this beat forecasts.
Given the disruption caused by flooding in NSW and Queensland, as well as slowdown in China’s economy analysts had predicted GDP would slow to just 0.5% in the first three months of the year. Growth in Q1 was supported by consumer spending, which rose 1.5% amid strong demand for transport services, restaurants, hotels, and recreation.
However, the GDP figures highlighted how soaring inflation and rising energy costs were suppressing growth, with Treasurer of Australia Jim Chalmers warning of tough times to come:
‘This perfect storm of energy price spikes is doing enormous damage to our employers, to our households and to our national economy. There are far more troubling aspects in our economy; skyrocketing inflation is a big challenge.’
Meanwhile, mixed news out of China is has acted as a headwind for the ‘Aussie’. Caixin manufacturing PMI improved to 48.1 in May, but despite beating out expectations of 47, it still points to a contraction in the manufacturing sector.
On the more positive side, Shanghai are ending their two-month lockdown, with restrictions finally lifted amid their zero-Covid policy. A welcome boost to the Chinese economy is likely to reflect positively on the Australian Dollar.
Pound (GBP) Subdued amid Brexit Uncertainty
The Pound (GBP) is wavering today, as UK political jitters appear to be weighing on the currency.
With support dwindling for Boris Johnson in the aftermath of the ‘partygate’ scandal, ongoing Brexit fears could also weigh on the Pound as the UK minister Conor Burns claims the Northern Ireland protocol threatens the Good Friday Agreement.
As tensions continue over the matter, and the UK refusing to back down, Burns had been assigned to speak to officials in Washington to present the UK’s case. But House Speaker Nancy Pelosi warned:
‘If the United Kingdom chooses to undermine the Good Friday accords, the Congress cannot and will not support a bilateral free trade agreement.’
With Brexit issues set to continue, investors are already wary of a potential trade war between the UK and EU, but with the US entering the fray, demand for the Pound could continue to weaken.
Pound Australian Dollar Forecast: Lack of UK Data to Hamper the Pound?
With the UK set for the long Jubilee weekend, data remains thin on the ground, the Pound will have to rely on the ongoing political and economic concerns to dictate movement.
Elsewhere, the Australian Dollar could see further movement with the release of the Balance of Trade tomorrow.
Another robust trade surplus could help to push the ‘Aussie’ higher in overnight trade.