Pound Australian Dollar (GBP/AUD) Exchange Rate Firms Despite UK Autumn Statement

Pound Australian Dollar (GBP/AUD) Exchange Rate Edges Higher Despite Poor UK Outlook

(Updated 16:53 17/11/22)

The Pound Australian Dollar (GBP/AUD) exchange rate ticked higher over the course of the day. GBP/AUD saw its gains pared after the UK’s Autumn budget statement, however.

Whilst the measures unveiled by Chancellor Jeremy Hunt helped to restore some credibility in the Pound (GBP), the forecast alongside the statement were poor. The UK’s Office for Budget Responsibility (OBR) forecast a year-long recession leading to 2% in GDP.

The OBR also predicted that living standards in the UK would fall by 7%, effectively wiping off 8 years of growth.

A risk-off mood helped to support the Pound against the Australian Dollar (AUD), however.

At time of writing the GBP/AUD exchange rate was at around AU$1,7725, which is up around 0.3% from this morning’s opening figures.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Boosted by BoE Rate Hike Bets

The Pound Australian Dollar (GBP/AUD) exchange rate is climbing today despite market jitters surrounding the UK’s Autumn statement. Bank of England (BoE) rate hike bets may be helping the currency pair to gain.

On the other hand, fears of the damage the Autumn statement could do may be capping gains for the pair. Strong Australian jobs data could also be keeping GBP/AUD suppressed.

At time of writing the GBP/AUD exchange rate was at around AU$1.7749, which is up around 0.4% from this morning’s opening figures.

Australian Dollar (AUD) Drops Despite Strong Jobs Data

The Australian Dollar (AUD) is falling against its competitors today. A risk-off mood is potentially denting enthusiasm for the risk-sensitive ‘Aussie’.

A steady climb in China’s Covid-19 case levels may also be weighing on AUD today. China reported 23,276 new Covid-19 infections on Thursday up from 20,199 the day before. The cities of Guangzhou, Chongqing, and manufacturing hub Zhengzhou all reported an increase in infections.

The currency could see major losses limited by upbeat employment data, however. Australia’s unemployment fell back to a five-decade low of 3.4% in October. Employment meanwhile rose by around 32,000, which was more than double market forecasts.

The data is seen as further evidence of the country’s tight labour market and cause for further interest rate hikes from the Reserve Bank of Australia (RBA).

Analysts were sceptical that that the figures could have any material impact on the RBA’s path however, potentially limiting the positive impact of the data on AUD.

Robert Carnell, Regional Head of Asia-Pacific Research at ING, said:

‘We don’t expect today’s data to have any material bearing on how the Reserve Bank of Australia conducts its monetary policy in the coming months. We still anticipate further tightening and at a moderate 25bp per meeting.’

Pound (GBP) Drops as Markets Await Autumn Statement, Climbs Against AUD

The Pound (GBP) is slipping ahead of the UK government’s Autumn statement later today. Sterling is making gains against the Australian Dollar (AUD), however.

The currency may be finding support from Bank of England (BoE) rate hike bets. The expectations come after hawkish comments from BoE Governor Andrew Bailey on Wednesday.

Sterling’s losses today may be coming from fears that the measures could do more harm than good, however. Analysts have expressed concerns that the statement could lead to a fresh wave of austerity that could dent the UK’s growth.

The UK’s poor outlook may also be continuing to weigh on the Pound today. Economists are predicting downbeat predictions from the Office for Budget Responsibility (OBR) following the statement.

GBP/AUD Exchange Rate Forecast: Will UK’s Autumn Statement Dent GBP Confidence?

Looking to the rest of the week for the Pound, the UK’s Autumn statement could see Sterling tumble later today. Markets could see Chancellor Jeremy Hunt’s expected range of spending cuts, tax rises, and cuts to energy bill support as denting UK growth and household spending.

On Friday, a forecast uptick in October’s retail sales figures could bolster GBP if the figures print as forecast. The rise is set to come after months of poor performance in the UK’s retail sector.

With no significant data releases left for AUD this week, movement in the currency could be driven by any further shifts in risk appetite.

Additionally, any increases in China’s Covid-19 case levels could weigh on the ‘Aussie’.

Gareth Monk

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