Pound Australian Dollar (GBP/AUD) Exchange Rate Ticks Higher as Risk Aversion Persists
(Updated 16:33 01/09/22)
The Pound Australian Dollar (GBP/AUD) exchange rate edged higher today. Fears surrounding the UK’s outlook in the coming months may have kept bets on the currency pair subdued. GBP/AUD may have also struggled to make gains amid concerns that Conservative leadership favourite Liz Truss may not provide the support necessary to UK households.
Significant losses for the pair may have been limited by sustained bets on interest rate hikes from the Bank of England (BoE), however. Speaking on Thursday, BoE policymaker Catherine Mann signaled her desire for further rate hikes in order to curb the ‘downside consequences’ of high inflation.
At time of writing the GPB/AUD exchange rate is at around $1.7016, which is up around 0.2% from the morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways amid Risk-Off Mood
The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. A poor outlook for the UK economy is likely weighing on the currency pair.
On the other hand, GBP/AUD could be finding support from evidence of poor manufacturing performance in China and a risk-off mood.
At time of writing the GBP/AUD exchange rate is at around $1.6980, virtually unchanged from this morning’s figures.
Australian Dollar (AUD) Edges Upward Despite China Slowdown
The Australian Dollar (AUD) is ticking higher today despite a risk-off market mood. The ‘Aussie’ could be finding support from bets on an imminent interest rate from the Reserve Bank of Australia (RBA).
Figures indicating the twenty seventh month of consecutive growth in Australia’s manufacturing sector may also be boosting the ‘Aussie’ today. The final reading of August’s PMI for the sector printed at 53.8.
Gains for AUD are likely being capped by several factors today, however. Chief among them is evidence that the Chinese economy is continuing to struggle. The Caixin manufacturing PMI for August fell to 49.5 amid weakened demand, power cuts, and the reintroduction of Covid-19 restrictions.
The figures confirmed the weak reading of China’s official manufacturing PMI on Wednesday. The world’s second largest economy has continued to struggle amid fresh Covid-19 outbreaks. Chinese officials announced today that the city of Chengdu will enter a four-day lockdown.
Finally, a drop in the price of iron ore may be keeping bets on AUD subdued. Prices of the commodity have slipped by around 2%.
Pound (GBP) Muted amid Fresh Warnings of Drop in Living Standards
The Pound (GBP) is edging higher against its rivals today despite a downbeat outlook for the UK economy. The currency is struggling against the US Dollar however, falling to its lowest level against USD since March 2020.
The woes for Sterling come as the UK’s soaring inflation and cost-of-living crisis continue to batter confidence in the currency. Fresh reports released by the Resolution Foundation thinktank indicated that UK household incomes could see their biggest squeeze in at least a century.
Lalitha Try, researcher at the Resolution Foundation, said:
‘Britain is already experiencing the biggest fall in real pay since 1977, and a tough winter looms as energy bills hit £500 a month. With high inflation likely to stay with us for much of next year, the outlook for living standards is frankly terrifying.’
Expectations of a 0.75% rate hike from the BoE could be underpinning Sterling today, however.
GBP/AUD Exchange Rate Forecast: Will UK’s Gloomy Outlook Continue to Weigh on Sterling?
The Pound is set to see no other significant data releases for the remainder of the week. The currency may be pushed even lower as confidence in the UK economy continues to plummet by the day.
Sterling may find some support after the final hustings for the Conservative leadership contest on Wednesday. Investors may take heart from the imminent confirmation of a new Prime Minister on 5 September.
GBP may also be buoyed by any bets on interest rate hikes from the Bank of England (BoE).
The Australian Dollar (AUD) will also see no other major data releases this week. The ‘Aussie’ could see further movement amid renewed Covid-19 restrictions across China, one of its major trading partners.
Any fluctuations in the price of iron could also affect the currency’s trajectory.
Finally, AUD could be bolstered by rate hike bets ahead of the RBA’s meeting next week.