Pound Australian Dollar (GBP/AUD) Climbs Despite Persistent Headwinds
The Pound Australian Dollar (GBP/AUD) exchange rate is continuing its recovery this morning in the wake of better-than-expected UK GDP growth.
At time of writing, the GBP/AUD exchange rate is around $1.7215, a 0.33% jump from this morning’s opening levels.
Pound (GBP) Buoyed on Surprise Economic Expansion
The Pound (GBP) recovers modestly as the UK economy expanded by 0.2% QoQ in Q2 compared to an expected 0.1% contraction. The news is likely to buoy investors as the data confirms that the UK is currently not in a technical recession.
However, despite the surprising expansion, the concerning undertone is that the UK economy is still 0.2% smaller than its pre-pandemic level. The economy continues to slow, and a recession is still very much on the cards. Paul Dales, Chief UK Economist has warned that despite the positive news, it makes the mini-budget potentially more devastating. He added:
‘The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels. It’s the only G7 economy in that situation and it makes the chancellor’s fiscal plans look even more untenable.’
Meanwhile, Prime Minister Liz Truss and Chancellor Kwasi Kwarteng will be meeting the head of the Office for Budget Responsibility (OBR) today. Having been asked not to produce a forecast to accompany the announcement of the mini-budget last Friday, emergency talks are now to take place.
Australian Dollar (AUD) Subdued on Mixed China Data
Meanwhile, the Australian Dollar (AUD) is failing to find demand this morning in the wake of mixed data out of China.
The government NBS manufacturing PMI recovered just above 50 for the first time in three months. A stimulus boost from the Chinese government and easing of Covid restrictions helped the recovery. But non-manufacturing declined for the third consecutive month to 50.6, just above stagnation.
Meanwhile, the Caixin manufacturing PMI, a non-government survey, unexpectedly fell to 48.1, the lowest reading since May. Output fell for the first time since then, and export sales declined by the fastest pace since April. Covid played a big part in slowing he sector.
Elsewhere, the imminent annexing of Ukrainian regions could weigh on global market sentiment. Concerns of heightened Russian aggression amid Putin’s formal annexation is likely to sour moods further, potentially denting the risk-sensitive ‘Aussie’.
Pound Australian Dollar Exchange Rate Forecast: OBR Meeting to Quell Investor Fears?
Looking ahead, the Pound Australian Dollar exchange rate could see further fluctuations in the wake of Truss meeting with the OBR.
Elsewhere, any further developments in Ukraine could weigh on global market sentiment, and in turn the ‘Aussie’.