Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates on UK’s Cost-of-Living Crisis
The Pound Australian Dollar (GBP/AUD) exchange rate is struggling find a clear direction today as fears of a looming UK recession edge ever closer.
At time of writing the GBP/AUD exchange rate is trading around $1.6981, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Persistent Recession Fears
The Pound (GBP) remains under pressure as a lack of data exposed Sterling to relentless domestic headwinds.
With the cost-of-living crisis ever worsening, the British Chambers of Commerce (BCC) have forecasted the UK will enter a recession in a matter of months. The BCC is calling for the incoming prime minister to take drastic action before it’s too late. Alex Veitch, Director of Policy at BCC, said of the gloomy outlook and how the government can provide support:
‘Along with taxation and labour measures, the BCC business support plan includes key asks to help businesses with spiralling energy costs. These include Covid-style support by introducing a Government Emergency Energy grant, a temporary cut in VAT on energy bills to 5% to reduce costs for firms and increased regulation of the energy market for businesses by Ofgem.’
Meanwhile, the Conservative leadership is winding down as polling closes tonight ahead of the announcement on Monday. The political circus that has dominated recent news is set to end. Either frontrunner Liz Truss or Rishi Sunak will be chosen as prime minister on Monday. However, despite the uncertainty ending, pressures are likely to continue as question marks remain over their fiscal policies.
The Resolution Foundation, the anti-poverty organisation, has warned that living standards will drastically fall. Soaring energy bills will cut household spending by 10%, an average drop of £3000, and will plunge 3 million people into poverty.
Australian Dollar (AUD) Quiet amid a Cautious Market Mood
The Australian Dollar (AUD) failed to find much strength today as the global market sentiment cooled. Rising Covid cases and a drop in manufacturing PMI in China continued to keep a lid on the ‘Aussie’.
Lending some moderate support to the Australian Dollar is news that the strong jobs market is likely to strengthen the market in the new year. MUFG Bank expects a recovery in 2023, they said:
‘The jobs market in Australia will support growth going forward with the labour participation rate at the highest level in 112 years.
‘Stronger wage growth is likely and that will ensure continued monetary tightening with risks to the upside relative to the RBA guidance.’
Pound Australian Dollar Forecast: Political Stability to Boost the Pound?
Data remains thin on the ground for the rest of the session. All eyes will then turn to the announcement of the UK’s next prime minister on Monday. With political uncertainty weighing heavily for the past several months, will the incoming PM bring much-needed fiscal support?
Elsewhere, any further developments in China and their stuttering economy could see the Australian Dollar fluctuate further.