Pound Australian Dollar Exchange Rate Rises as UK Dockworkers Prepare to Strike
(Updated 16:00, 05/08/2022) The Pound Australian Dollar (GBP/AUD) exchange rate rose falteringly through this afternoon’s session despite a broad Sterling downside.
As the UK cost-of-living crisis rages on, the country’s economy will also have to contend with industrial action from 21 August, as workers at Felixstowe port pledge to strike for eight days.
Employees of the UK’s largest container port are involved in an ongoing pay dispute with the Felixstowe Dock and Railway Company. The Unite union says over 1,900 members will be participating in the action.
Meanwhile in Australia, AUD has remained subdued by a risk-off impulse, triggered by US House of Representatives speaker Nancy Pelosi’s visit to Taiwan. Also denting market sentiment are recession fears and ongoing conflict in Ukraine.
Original article continues below:
GBP/AUD Exchange Rate Wavers as Investors Digest BoE Forecast
The Pound Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range today as both currencies face inflation-based headwinds.
The Reserve bank of Australia (RBA) gave a fairly downbeat forecast in the Asian session, warning that rising living costs, higher interest rates and falling house prices will weigh upon the economy ahead.
At the time of writing, GBP/AUD is trading at A$1.7458, virtually unchanged from today’s opening levels.
Australian Dollar (AUD) Trades Mixed After RBA Statement
The Australian Dollar (AUD) is fluctuating against its peers today as investors digest the implications of the RBA’s latest policy statement.
The Reserve Bank has struck a more pessimistic tone than the Australian government, revising down its forecasts for GDP growth and implying it may need to hoist its interest rate for longer to keep prices increases from becoming unmanageable.
According to the RBA, Australia’s consumer price index will peak at 7.75% at the end of this year, inching lower to 6.25% in 2023.
‘Domestic retail gas and electricity prices are expected to increase by 10–15% over the second half of 2022,’ say policymakers, ‘given the high global price of energy and recent disruptions in the domestic electricity market.’
The central bank predicts that as supply constraints continue to ease, inflation will be back around the 2 to 3% target range by the end of 2024 – though could still be running as high as 3.5% midway through the year.
The uncertainty inherent in the RBA’s report has led to some volatility in the ‘Aussie’; the outlook could depend, according to the bank, on how much of a ‘general inflation psychology shift’ has taken place.
Pound (GBP) Faces Ongoing BoE Headwinds
The Pound (GBP) is wavering against its peers today following yesterday’s spike downward after the Bank of England (BoE)’s interest rate decision.
The outlook for the British economy remains weak, with blame shifting between the central bank and the government for the UK’s current predicament.
Following criticism from allies of Liz Truss, BoE Governor Andrew Bailey denied being too slow to raise interest rates, saying that no one knew two years ago that a war in Ukraine was on the horizon.
Meanwhile, others insist that:
‘This whole period is [Boris Johnson’s] legacy. [Brexit] has dominated our economic performance since 2016… Brexit was thought to be the answer to our economic woes. In the way it has been managed, it has only exacerbated them.’
Meanwhile, cost-of-living issues remain in the spotlight. Labour’s shadow work and pensions secretary, Jonathan Ashworth, says the UK is facing a ‘juggernaut’ that will smash through family finances.
Elsewhere, Jack Leslie and James Smith of Resolution Foundation say the BoE’s forecasts are ‘disastrous’ for living standards:
‘The Bank now expects that real household disposable income will fall by around 3.7% over the course of 2022 and 2023… To pile misery onto families, the Bank forecasts that unemployment will rise by roughly 900,000 people.’
GBP/AUD Exchange Rate Forecast: External Factors to Drive Movement?
Looking ahead, a lack of UK or Australian data through the remainder of today’s session and into next week leaves the Pound Australian Dollar exchange rate to trade on external factors.
Buoyant risk sentiment could dent GBP/AUD prospects; meanwhile, uncertainty in the UK’s ongoing leadership contest could dent Sterling further.