Pound Australian Dollar (GBP/AUD) Exchange Rate Weakens amid Worsening Cost-of-Living Crisis
The Pound Australian Dollar (GBP/AUD) exchange rate is sliding today as the UK’s energy cap to soar by 80%, compounding the cost-of-living crisis.
At time of writing the GBP/AUD exchange rate is trading around $1.6944, a 0.20% drop from this morning’s opening levels.
Pound (GBP) Under Pressure amid Soaring Energy Prices
The Pound (GBP) continues to struggle for demand as a lack of data leaves Sterling exposed to the worsening cost-of-living crisis.
Ofgem, the energy regulator, announced that from October the energy price cap will soar by 80% to £3549. The figure is almost triple of that from last October as households prepare for a tough winter. The cost-of-living is already weighing on the UK, as inflation breached double digits last month. Growing expectations of the figure hitting 18% by January could be catastrophic for the UK.
But fears are growing that unless the government step in and provide substantial financial aid, households could be left unable to afford heating this winter. Michael Lewis, founder of moneysavingexpert.com, has warned that people will die unless sufficient help is provided. He said:
‘This is a catastrophe, plain and simple. Unaffordable. If we do not get further government intervention, on top of what was announced in May, then lives will be lost this winter. Too many people to think about, because of these unaffordable, terrible, rises in energy bills.’
Ofgem Chief Executive Jonathan Brearley admitted that the incoming Prime Minster will need to act urgently to provide assistance. Chancellor of the Exchequer Nadhim Zahawi has said that he is working out plans for financial aid to be implemented as soon as the new Prime Minister is in office.
The longer the UK government take in rolling out sufficient fiscal support, the Pound will remain under pressure. The cost-of-living crisis continues to take a toll on the UK economy, deterring GBP investors.
Australian Dollar (AUD) Wavers on Fluctuating Market Mood
The Australian Dollar (AUD) softened after its rally yesterday amid a cautious market mood. Investors await key speeches from the Jackson Hole symposium today. Market mood has retreated from its buoyant mood yesterday as investors await potentially hawkish commentary from Federal Reserve Chair Jerome Powell.
Boosting the ‘Aussie’ however, is the huge financial stimulus package China announced earlier in the week. As the world’s second largest economy is also Australia’s biggest trade partner, any boost to China could benefit the Australian Dollar. An injection of cash to the Chinese economy means a significant boost in Australian exports.
Pound Australian Dollar Forecast: UK Government Fiscal Support to Buoy the Pound?
Without any further data to close the session, market sentiment will continue to influence the Pound Australian Dollar exchange rate. All eyes will be on the Jackson Hole symposium as Federal Reserve Chair Jerome Powell will be speaking.
Elsewhere, the persistent domestic troubles that are engulfing the UK will likely see the Pound slip further. Unless the UK government intervene with support, expect Sterling to struggle.