Pound Australian Dollar Exchange Rate Relinquishes Gains as Strikes Continue
(Updated 17:00, 24/08/2022) The Pound Australian Dollar (GBP/AUD) dipped below today’s opening levels toward the end of the European trading session, having made some gains throughout the day. Ultimately subduing GBP, however, were a basket of external headwinds including ongoing strike action in the UK.
Unions warned midweek that the current strike at Felixstowe – Britain’s largest container port – would escalate if workers were not given an improved pay offer. Wednesday marked day 4 of a planned 8-day walkout.
Unite general secretary Sharon Graham address workers:
‘The company [Felixstowe Ports] is making an absolute fortune. it could pay 50 per cent more on your wages and still be in profit. We are asking for 10 per cent.
If [employers] don’t come back to the [negotiating] table this action will continue, and that’s not good for the public, it certainly isn’t good for these workers and I’d also say it’s not good for the employer.’
Original article continues below:
GBP/AUD Exchange Rate Fluctuates amid Lack of Data
The Pound Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as both currencies lack significant trading stimulus. Market mood is subdued, capping gains for risk sensitive currencies such as the Australian Dollar (AUD).
At the time of writing, GBP/AUD is trading at A$1.7070, virtually unchanged from today’s opening levels.
Pound (GBP) Remains Pressured by Energy Price Prospects
Rising energy prices in the UK continue to exert pressure upon the Pound (GBP), as support for households is forecast to cost the government billions of pounds.
The head of Scottish Power, one of the UK’s largest energy groups, proposed a £100bn rescue plan that will enable Ofgem to cap energy prices around £2,000. This could shield UK households from further financial hardship.
According to the energy company, suppliers would cover the difference between the capped price and the wholesale charge by borrowing from a deficit fund arranged by government.
Another option available to the UK government is supplying relief direct to households via support payments. A new paper by the Institute for Government predicts that offsetting energy bill increases of £900 this autumn could cost ministers £23bn – rising to £90bn next year.
Olly Bartrum, a senior economist and one of the paper’s authors, comments:
‘Deciding whether and how to help households and businesses with these costs will be one of the most urgent tasks facing the new government.
This may require substantial extra spending this winter and even more again next year – even limiting help to the most vulnerable could cost several billion pounds.’
Australian Dollar (AUD) Inches Higher amid Quiet Conditions
The Australian Dollar is trading broadly higher this morning, despite a lack of clear trading stimulus. The currency traded in a mixed range yesterday, as both AU PMIs missed forecasts: losses were capped, however, as manufacturing activity improved for the twenty-seventh consecutive month.
Lending some support today may be optimism in China. Steel prices are rising as traders heed the People’s Bank of China (PBoC)’s recent injection of funds into the national economy. Reuters analysts observe:
‘China on Monday cut benchmark lending rates and lowered the mortgage reference by a bigger margin to boost its economy hurt by COVID-19 outbreaks and a property crisis.’
Tailwinds in China invariably buoy the ‘Aussie’ on account of its role as a proxy for the Chinese economy.
Meanwhile, the value of iron ore – one of Australia’s key exports – is firming, potentially lending AUD additional support. On the other hand, coal prices are weakening, although not to an extent that jeopardises the commodity’s broad upward trend.
Possibly repressing further tailwinds is planned strike action from nurses in New South Wales. The NSW Nurses and Midwives Association announced there will be a 24-hour strike on Thursday 1 September to highlight the issue of unsafe staffing ratios in care settings.
Pound Australian Dollar Exchange Rate Forecast: External Factors to Influence Trading?
A lack of significant data through the remainder of today’s session leaves GBP/AUD to trade on external factors such as risk sentiment.
Global data may have some influence on market mood, as the US census bureau will release durable goods data for July this afternoon. If America’s factory sector continued to strengthen as forecast, risk appetite may improve.
Elsewhere, comments from analysts and economists regarding the UK’s energy crisis may spark further GBP headwinds, potentially subduing the Pound Australian Dollar exchange rate.