Pound Australian Dollar (GBP/AUD) Exchange Rate Wavers as UK PMIs Highlight Recession Fears

GBP/AUD Exchange Rate Subdued Following UK PMI Release

The Pound Australian Dollar (GBP AUD) exchange rate is muted this morning. As the UK’s latest PMI release highlight recession concerns.

At the time of writing the GBP AUD exchange rate is trading at around AU$1.7727, virtually unchanged from this morning’s opening levels.

Pound (GBP) Muted as PMIs Point to Probable UK Recession

The Pound (GBP) is trading without any strong direction this morning, following the release of the UK’s PMIs.

June’s preliminary PMIs reported a larger-than-expected slowing of growth in the manufacturing sector. But that the vital service sector continued to expand at the same pace as it did in May.

While the services PMI printed above expectations, analysts warn the index flags up recession warning signs.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence comments:

‘Business confidence has now slumped to a level which has in the past typically signalled an imminent recession. The weakness of the broad flow of economic data so far in the second quarter points to a drop in GDP which the forward-looking PMI numbers suggest will gather momentum in the third quarter.

‘The survey data suggest the rate of inflation will meanwhile remain historically high for some time to come, indicating that the UK looks set for a troubling combination of recession and elevated inflation as we move into the second half of the year.’

Elsewhere the Pound is also being weighed down the second day of UK rail strikes, which is brining further disruption to the UK economy.

Australian Dollar (AUD) Undermined by Falling Commodity Prices

The Australian Dollar (AUD) is struggling to find support this morning amidst a sharp slump in commodity prices.

Iron ore, Australia’s single largest export, has slumped over 4% so far today. Iron ore prices are now at their lowest level since December, driven by concerns over oversupply in China.

Commonwealth Bank of Australia analyst Vivek Dhar, commented:

‘Markets are particularly worried that demand growth expectations linked to China’s pledge to boost infrastructure investment may not materialise, especially with China’s zero-covid policy still in play.’

A prevailing risk-off mood has also undermined AUD exchange rates. Global recession fears continue to grow leaving investors to favour safe-haven assets.

Pound Australian Dollar Forecast: Slump in UK Retail Sales to Weigh on Sterling?

The Pound Australian Dollar exchange rate may falter at the end of this week with the publication of the UK’s latest retail sales figures.

Sales growth is expected to slump in May as the cost of living crisis sees consumers rein in their spending.

Any signs that consumer spending is flagging will no doubt stoke concerns over UK growth. The Pound likely weakening as this stokes recession fears.

In the meantime, a lull in domestic data is likely to see AUD exchange rates driven primarily by market sentiment. Will a cautious mood see investors shy away from the ‘Aussie’?

Matthew Andrews

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