Pound Australian Dollar Exchange Rate Dips amid Cooling UK Housing Market
The Pound Australian Dollar (GBP/AUD) exchange rate is slipping this morning amid a mixed market mood. Choppy trading conditions are leaving the pairing open to domestic woes and market sentiment.
At time of writing the GBP/AUD exchange rate is trading around $1.7727, a 0.39% drop from this morning’s opening levels.
Pound (GBP) Undermined by Tumbling House Prices
The Pound is struggling for demand on the final day of trading in 2022. Embroiled in a myriad of domestic headwinds, and a lack of economic data, Sterling remains vulnerable.
The housing market continues to cool as house prices slumped for the fourth consecutive month. Marking the longest run of declining prices since 2008, experts are fearing further drops as the cost-of-living crisis tightens its grip on the economy. Tom Bill, head of UK residential research at Knight Frank, warns that house prices could decline by 10% over the next two years. Bill added:
‘The steep monthly house price declines that followed the mini-Budget have reduced as mortgage market volatility calms down. However, borrowing costs have become more expensive as well as more stable, which will keep downwards pressure on prices.’
Meanwhile, further weighing on the Pound are fears of a continued fall in living standards. The Resolution Foundation forecast another drop in living standards in 2023, as disposable incomes are expected to fall by 3.8%. Surging energy bills and tax hikes could see households suffer another year of declining living standards.
Despite an expected end to double-digit inflation, household incomes are expected to continue to fall in 2023. Torsten Bell, Chief Executive of Resolution Foundation, commented:
‘From a cost-of-living perspective, 2022 was a truly horrendous year – far worse than any year in the pandemic or financial crisis.
‘But it looks set to be a groundhog year for many families whose incomes look set to fall by just as much as they did in 2022.’
Australian Dollar (AUD) Climbs Despite China Covid Fears
The Australian Dollar is finding modest strength amid a mixed market mood. Health experts are warning of 9000 deaths a day in China as Covid continues to run rampant.
After imposing travel restrictions on travellers arriving from China, the US has announced a change in tactics. The US Center for Disease Control and Prevention plans to test wastewater from international aircraft as a more effective method of slowing the spread of viruses. Concerns are mounting of China returning to its zero-Covid stance, and a return to a stuttering economy.
With infections sweeping the world’s second largest economy, the risk-sensitive ‘Aussie’ could slide on waning global market sentiment.
Pound Australian Dollar Forecast: New Year to Bring New Hope for Sterling?
Looking ahead, the Pound Australian Dollar exchange rate will be left to trade on market mood and domestic headlines until the new year. Continued industrial strikes could keep a firm lid on Sterling until the release of economic data in the new year.
Meanwhile, AUD investors will be keeping a close eye on developments in both China and Ukraine. Any further negative headlines could sour the ‘Aussie’ mood.