Pound Australian Dollar Exchange Rate Weakens as Market Weigh GBP Downside
(Updated 15:50, 01/07/2022) The Pound Australian Dollar (GBP/AUD) exchange rate is sinking through the second half of today’s session, as Sterling headwinds catch up with AUD downside.
Low risk appetite persists into the afternoon, continuing to subdue the Australian Dollar – but investors are also digesting the clutch of negative trading stimuli weighing upon the Pound. June’s manufacturing data continues to dent GBP, alongside fresh inflationary pressures.
The price of petrol in the UK is on the rise once more as RAC fuel spokesman Simon Williams criticises ‘the biggest retailers’ resistance to reduce their pump prices in line with the lower wholesale cost of unleaded’:
‘Rather than passing on some of the savings they are benefiting from, they are clearly banking on the wholesale market moving up again which is disappointing for drivers who are desperate to see an end to ever-rising prices.’
Also capping Sterling gains is fresh Bank of England (BoE) data that reveals UK consumers are saving less, although they are borrowing more. Consumers borrowed an additional £800m in consumer credit last month, yet around £5.7bn was banked as savings – down from a net flow of £6.3bn in April.
Original article continues below:
GBP/AUD Exchange Rate Spikes as Market Mood Sinks
The Pound Australian Dollar (GBP/AUD) exchange rate rocketed overnight despite considerable Pound (GBP) headwinds, as weak market sentiment subdued the Australian Dollar (AUD).
At the time of writing, GBP/AUD is trading at A$1.7753, up 0.7% from today’s opening levels.
Pound (GBP) Dips Against Majority of Peers
The Pound is falling against most of its rival currencies today, despite trending up against the Australian Dollar.
Alongside external pressures such as bearish trading sentiment, political tumult and unrest over an ever-climbing UK cost-of-living, Sterling sentiment is dampened this morning by worse-than-expected manufacturing data, according to the S&P Global/CIPS report.
While remaining above the threshold that separates expansion from contraction, manufacturing activity in June dropped to 52.8 rather than the 53.4 initially estimated.
Furthermore, experts are predicting that risk-off headwinds will persist over the course of the summer – according to Generali Investments, central banks are likely to risk a recession with more aggressive policy tightening, while reassurances from top policymakers seem a little far-fetched.
Finally, consumer confidence is unlikely to revive amidst falling customer service standards at various energy companies, including Utilita and Ovo Energy. Research by Citizens Advice has found that customers have had to wait longer for their calls to be answered and have regularly been unable to get hold of their supplier.
This news comes amidst widespread customer dissatisfaction in other sectors such as travel, as staff shortages and logistical miscalculations result in painstaking delays and cancellations for UK travellers.
Australian Dollar (AUD) Plummets as Markets Remain Bearish
The Australian Dollar dropped sharply against its peers overnight, despite the Ai group manufacturing index printing better than expected. The index rose to 54 in June, from a four-month low of 52.5 in May.
Also failing to lend AUD support was China’s Caixin manufacturing PMI, which printed at 51.7 rather than 50.1 as forecast – demonstrating better-than-expected growth in June. As a proxy for the Chinese economy, positive Chinese data often boosts the ‘Aussie’.
Suppressing demand instead is widespread risk aversion in the markets, fuelled by escalating fears of an economic slowdown. Inflationary pressures remain high globally, while morale and consumer spending appear to be taking a hit.
And while manufacturing in China is on the up, recent data shows that factories in several Asia-Pacific markets continue to suffer from supply disruptions, rising costs and material shortages – feeding the recession narrative.
Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said of a decline in Taiwanese factory output:
‘The fact that firms currently project a fall in output over the coming year emphasises the challenges that lie ahead.’
Pound Australian Dollar Exchange Rate Forecast: Market Sentiment to Cap Potential Downside?
Looking ahead, weakness in the Pound could help to reverse some GBP/AUD tailwinds, as the UK’s economic outlook remains uncertain and GBP investors contemplate today’s disappointing PMI release.
However, the Australian Dollar is unlikely to climb given downbeat trading sentiment. Unless external factors conspire to lift appeal for the Antipodean currency, the Pound Australian Dollar exchange rate is likely to linger around a 15-week high.