Pound Australian Dollar (GBP/AUD) Exchange Rate Subdued amid Risk-On Mood and Poor UK GDP
The Pound Australian Dollar (GBP/AUD) exchange rate is struggling today as the risk-sensitive ‘Aussie’ holds its recent gains amid an upbeat market mood.
At the time of writing, GBP/AUD is trading at around AU$1.7956. This is down 0.4% from yesterday afternoon’s closing level but slightly up from this morning’s three-week low of AU$1.7899.
Australian Dollar (AUD) Firms as Risk Sentiment Improves
The Australian Dollar (AUD) is holding strong against the Pound (GBP) this morning as risk appetite underpins AUD exchange rates.
Overnight, news that the People’s Bank of China (PBoC) was committed to boosting economic growth in 2023 added to an already upbeat market mood, lifting the risky ‘Aussie’.
The positive tone has spread into European markets this morning, with equities trending higher.
Additionally, commodity markets are also climbing, adding to the factors supporting the resource-linked Australian Dollar. In particular, iron, gold, coal and petroleum – Australia’s four most important exports – are all up today.
Pound (GBP) Pressured by Poor GDP
Meanwhile, Sterling is struggling after the UK’s final GDP growth rate for the third quarter of this year revealed a larger-than-forecast contraction.
The UK economy shrank 0.3% in the three months from July to September, more than previous estimates of a 0.2% contraction. In addition, the second-quarter growth rate was revised down from 0.2% to 0.1%.
John Leiper, Chief Investment Officer at Titan Asset Management, commented:
‘UK GDP declined meaningfully in the third quarter, down -0.3%. That’s worse than expected and brings the annual number to just 1.9% from 2.4% prior. That is the lowest reading since June 2021 following a sharp rebound in activity coming out of the Covid slump. It is concerning, albeit not too surprising, to see household consumption and total business investment declined meaningfully as the economic environment continues to sour.
‘This sets the scene for a dour 2023 and is consistent with our expectations for a recession next year.’
GBP/AUD Exchange Rate Forecast: Sterling to Remain Subdued?
Looking ahead, a lack of notable data for the rest of the day could leave the Pound ‘Aussie’ pair to trade on market risk appetite. If the tone remains bullish, AUD could retain its gains. If sentiment sours, however, then GBP may be able to claw back some losses.
Movements in the commodities markets could also impact the ‘Aussie’. The Australian Dollar will likely hold strong if the markets stay healthy.
As for the Pound, UK GDP could continue to weigh on Sterling throughout the morning. Domestic headlines could also impact GBP, particularly concerns about the intensifying wave of industrial action.