Pound Australian Dollar (GBP/AUD) Fluctuates on New PM’s Economic Policies
The Pound Australian Dollar (GBP/AUD) exchange rate is trading erratically as investors await Prime Minister Liz Truss’ economic policies to tackle the escalating cost-of-living crisis.
At time of writing, the GBP/AUD exchange rate is around $1.7104, relatively unchanged from this morning’s levels.
Pound (GBP) Fluctuates on Fiscal Plan Announcement
The Pound (GBP) is struggling to find a clear direction today ahead of the announcement of fiscal support plans. With new Prime Minister Liz Truss planning to freeze energy prices for households for up to 18 months, investors are concerned of the cost. With her first cabinet meeting planned today, announcement of the new financial support package is set for tomorrow. Investors will be eagerly awaiting the plans which will likely involve tax cuts to boost the economy and the rumoured £200bn support package for households.
In what will be the most challenging issues an incoming UK prime minister has dealt with post-war, Truss will have to face an escalating cost-of-living crisis, out of control inflation, and an imminent recession. The new PM announced her first cabinet today, charged with dealing with the UK’s myriads of problems. Truss has outlined her main priorities in providing bold tax cuts to boost the economy, fixing the NHS, and bringing the energy crisis under control.
However, concerns remain over surging government borrowing costs, and the uncertainty surrounding the exact details of the proposed financial support package. With Bank of England (BoE) policymakers set to make an appearance before parliament today, any hints of future rate hikes could see further fluctuations for Sterling.
Australian Dollar (AUD) Under Pressure from Underwhelming Data
The Australian Dollar (AUD) is failing to find much demand today, despite the Reserve Bank of Australia (RBA) hiking interest rates by 50bps this week. Mixed domestic data was joined by downbeat Chinese data.
GDP growth data for Australia printed slightly lower than expected when QoQ growth showed a 0.9% increase versus an expected 1%. It is the first full quarter since domestic and international borders reopened since the pandemic began. However, Australian GDP grew by 3.6% in Q2 over the same period last year.
Meanwhile, China saw an unexpected drop in its trade surplus, plunging to a three-month low of $79.39bn, far below market forecasts of 92.7bn. A softer rise in exports amid Covid-related disruptions and historic heatwaves domestically, followed a drop in foreign demand due to inflationary pressures.
Pound Australian Dollar Exchange Rate Forecast: UK Fiscal Support Package to Buoy the Pound?
Tomorrow will see the announcement of exactly how Truss attempts to tackle the myriad of issues the UK is facing. Investors will be keenly waiting on the potential economic impact the fiscal aid could have.
Elsewhere, Australia’s balance of trade is due to print tomorrow. Despite an expected fall from record highs, the continuing strength of exports thanks to China’s push for economic recovery could see the ‘Aussie’ tick higher.