Pound Australian Dollar (GBP/AUD) Firms amid Improving Risk Appetite
The Pound Australian Dollar (GBP/AUD) exchange rate is rallying this morning despite UK house prices tumbling at fastest rate since 2020.
At time of writing, the GBP/AUD exchange rate is around $1.7825, a 0.36% climb from this morning’s opening levels.
Pound (GBP) Supported by Risk-On Impulse
The Pound (GBP) is enjoying moderate success against many of its peers this morning, despite tumbling house prices. With risk appetite improving on lowered Federal Reserve rate hike expectations, Sterling found support.
Nationwide building society reported that house prices slid 1.4% in November, the fastest pace in almost 18 months. The impact from the disastrous mini-market continued to wreak havoc on the markets. The data also shows the housing market is finally cooling.
Elsewhere, research conducted by the London School of Economics (LSE) has shown that Brexit has added almost £6bn to UK food prices in two years. The cost of importing food from the EU has drastically risen in the wake of extra red tape entering the UK. The LSE claims that an extra £210 has been added to the average household food bill over 2020 and 2021. Richard Davies, professor at Bristol University and co-author of the report, said of the findings:
‘In leaving the EU, the UK swapped a deep trade relationship with few impediments to trade for one where a wide range of checks, forms and steps are required before goods can cross the border. Firms faced higher costs and passed most of these on to consumers.’
Meanwhile, final manufacturing PMI data was revised slightly higher than preliminary estimates. Despite pointing to a fourth consecutive month of contraction, the manufacturing sector improved marginally to 46.5 compared to 46.2 in October. However, business sentiment dropped to the lowest since April 2020, as recession fears take hold.
Australian Dollar (AUD) Muted Despite Upbeat Market Mood
The Australian Dollar (AUD) is struggling for demand this morning, despite rare positive news out of China.
A risk-on impulse was supported by reports from China that they could be close to easing their zero-Covid policy. Beijing officials have announced that they will be allowing those who have tested positive for Covid in residential communities to quarantine at home.
Staying with China, November’s Caixin manufacturing PMI edged slightly higher from 49.2 to 49.4 but remained firmly in contraction territory. Despite the better-than-expected figure, the fourth straight month of declining factory activity is likely to weigh heavy on global market sentiment. Dr Wang Zhe, economist at Caixin Insight, said of the data:
‘The pandemic continued to take a toll on the economy. Beijing should further coordinate fiscal and monetary policies to expand domestic demand and boost incomes.’
Pound Australian Dollar Exchange Rate Forecast: BoE Decision Maker Panel to Sour Sterling?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the latest Bank of England (BoE) Decision Maker Panel (DMP) business survey. Last month’s survey showed a drastic fall in inflation expectations and could influence monetary policy going forward.
Meanwhile, Australian retail sales are due to print. If the preliminary 0.6% is met, the ‘Aussie’ could climb.