Pound Australian Dollar (GBP/AUD) Exchange Rate Stumbles on Stagnation Warnings
(Updated 15:45, 8/6/22) The Pound Australian Dollar (GBP/AUD) exchange rate fell today following a stark warning from the Organisation for Economic Co-Operation and Development (OECD).
In the Paris-based thinktank’s half-yearly economic outlook, the OECD sharply downgraded its growth estimates. It predicts the UK economy will grow by 3.6% in 2022 and stagnate next year, down from 4.7% and 2.1% growth, respectively.
Laurence Boone, Chief Economist at the OECD, said that rising interest rates, higher taxes, surging energy costs and reduced trade are all battering the UK economy.
At the time of writing, GBP/AUD is trading at AU$1.7388. This is around 0.35% down from AU$1.7451 at the start of today’s European session.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Wobbles amid Headwinds on Both Sides
The Pound Australian Dollar (GBP/AUD) exchange rate rose overnight but is wavering this morning. Both currencies face headwinds amid a souring market mood.
GBP/AUD is currently at AU$1.7433, up from AU$1.7400 in overnight trade.
Australian Dollar (AUD) Loses RBA Upside amid Commodities Pullback and Risk-Off Mood
The Australian Dollar (AUD) retreated overnight, trimming some of the gains it made following the Reserve Bank of Australia (RBA) interest rate rise. Against the Pound (GBP), the ‘Aussie’ fell back to the same level it was at before the RBA meeting.
The movement seems to have been due to a corrective pullback as markets fully digested the Australian central bank’s rate decision.
Although yesterday’s 50-bps hike was a hawkish surprise, the RBA signalled that future decisions will continue to be data-driven and that a larger hike now may necessitate smaller hikes down the line. As a result, markets have not significantly repriced expectations for the RBA’s overall tightening cycle.
In addition, retreating prices in the commodities market may be pressuring the resource-linked ‘Aussie’. Coal, gasoline and gold – three of Australia’s top four exports – are all in the red today.
A downbeat market mood is also pushing the risk-sensitive Australian Dollar lower this morning. European equity markets fell as this morning’s trade began, indicating a lack of risk appetite.
Pound (GBP) Capped as Tailwinds Fade
The weakness in the ‘Aussie’ allowed GBP/AUD to make gains this morning, despite Sterling slipping against its other peers. However, the currency pair is now wavering.
The Pound ‘Aussie’ exchange rate strengthened yesterday after Boris Johnson won a bruising no confidence vote. The victory means Johnson should be safe from a challenge for another year, providing some political certainty for the UK.
However, Sterling is paring its gains this morning. Although Johnson survived the motion of no confidence, he now holds only a tenuous grip on power, presiding over a deeply divided Conservative party.
Meanwhile, the UK economy seems to be heading for a storm. Surging inflation and slowing growth continue to worry economists, while energy-industry leaders have said that the government’s windfall tax will deter investment.
These concerns seem to be limiting GBP/AUD’s gains this morning.
GBP/AUD Exchange Rate Forecast: Pound ‘Aussie’ Pair to Wobble?
Looking ahead, GBP/AUD may waver for the remainder of the day as both currencies face headwinds.
If a clear direction does emerge, risk appetite could be a defining factor. An improvement in market mood would likely boost the riskier ‘Aussie’, while a souring sentiment may favour Sterling.
Economic data for both GBP and AUD is fairly thin for the remainder of the week, so there could be some volatility as each currency struggles for a clear trajectory.