Pound Australian Dollar (GBP/AUD) Exchange Rate Extends Uptrend despite Sterling Headwinds

Pound Australian Dollar Exchange Rate Trends Higher Although UK Pressures Mount

(Updated 16:00, 9/08/2022) The Pound Australian Dollar (GBP/AUD) exchange rate continued to climb through today’s European afternoon despite headwinds facing the UK economy in the form of escalating inflationary pressures.

According to new forecasts, energy bills are now likely to top £4,200 from January: news which is pressuring the UK government to increase support measures for struggling households. ‘Money Saving Expert’ Martin Lewis said the latest forecast was ‘tragic news’ and urged the UK’s ‘zombie government’ to come up with an immediate action plan; Dr Craig Lowrey at consultancy firm Cornwall Insight comments:

‘If the £400 was not enough to make a dent in the impact of our previous forecast, it most certainly is not enough now. The government must make introducing more support over the first two quarters of 2023 a number one priority.’

Yet despite calls for action, Prime Ministerial candidate Liz Truss has reiterated her stance on ‘handouts’. The current secretary of state insisted she would not provide funds to people struggling with bills, preferring to prioritise tax cuts.

Original article continues below:

GBP/AUD Exchange Rate Recovers Losses as BRC Data Impresses

The Pound Australian Dollar (GBP/AUD) exchange rate has rebounded this morning following a downturn during the Asian session. Positive UK retail data helped to buoy the Pound (GBP), pushing GBP/AUD higher.

At the time of writing, GBP/AUD is trading at A$1.7357, up 0.4% from today’s opening levels.

Pound (GBP) Wavers, Retail Data Caps Losses

The Pound is trading in a mixed range this morning, as various analysts warn that July could be the ‘lull before the storm’ for UK retailers and consumers.

The British Retail Consortium’s retail sales monitor for July printed at 1.6% rather than -1.1% as expected, representing an increase in sales in the last year: this marked the first rise in five months as sales of summer clothing, electric fans and picnic food boosted spending.

Nevertheless, Paul Martin, the UK head of retail at the advisory firm KPMG, warns:

‘Conditions [are] set to get tougher as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates. With stronger cost of living headwinds on the horizon, consumers will have to prioritise essentials.’

Furthermore, Dame Sharon White, chair of John Lewis, remarked:

‘I think the big worry that everybody has is inflation combined with low growth, low productivity. So I think the big focus for all of us is how do we avoid stagflation?’

July’s rise in sales, though positive for industry, reflects the effect of climbing consumer prices. While inflation is running at a 40-year high of 9.4%, spending is increasing despite a drop in the number of items sold.

With markets focused upon inflation and the cost-of-living crisis, Sterling is unable to make significant headway against its peers today.

Australian Dollar (AUD) Drops on Mixed AU Data

The Australian Dollar (AUD) is trending down so far today, subdued by mixed confidence data as well as a tepid market mood.

Australia’s Westpac consumer confidence index printed at 81.2 for August rather than the 85 expected – a fall from last month’s 83.8; confidence change came in at -3% as opposed to 1.4%.

The data marked the nineth consecutive weakening, prompted by surging prices and the prospect of further monetary policy tightening from the Federal Reserve. The gauge of the economic outlook for the next 12 months slumped by 8%, and for the next five years fell 1% to 90.7.

Meanwhile, NAB business confidence printed above forecast at 7 – 5 points above July’s upwardly revised reading. In contrast with consumer confidence, businesses were optimistic amid stronger forward orders and capacity utilization.

NAB Group Chief Economist, Alan Oster, commented:

‘Overall, the survey suggests that despite global and domestic headwinds, demand has remained strong – and inflationary pressure continues to build suggesting that inflation is yet to peak.’

However, business confidence failed to significantly uplift AUD sentiment given downbeat market sentiment. Investors remain cautious of placing bullish bets ahead of tomorrow’s US inflation data, as US stock index futures remain flat and the 10-year US Treasury bond yield trends sideways.

GBP/AUD Exchange Rate Forecast: Chinese, US Data to Inspire Movement?

Looking ahead, a lack of both UK and AU data tomorrow leaves GBP/AUD to trade on external factors.

Both China and the US will release their latest inflation rate data, which is likely to affect market sentiment and subsequently, the Pound Australian Dollar exchange rate. If China’s CPI increases closer to its 3% target, risk appetite may be renewed: if core inflation in America climbs likewise, risk-off gains could weaken.

Olivia Evershed

Contact Olivia Evershed


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