Pound Australian Dollar (GBP/AUD) Exchange Rate Limps Lower as UK Economy Woes Grow
The Pound Australian Dollar (GBP/AUD) exchange rate has declined today as an upbeat market mood and worries about the UK economy pressure the currency pair.
At the time of writing, GBP/AUD is trading at AU$1.7585, having fallen around 0.3% since the overnight session.
Pound (GBP) Subdued amid UK Economy Concerns
The Pound (GBP) is muted today as GBP investors remain concerned about the health of the UK economy.
Earlier this morning, the UK’s construction PMI printed below forecast, with the sector dipping into contractionary territory. Although the construction PMI does not usually have any notable impact on GBP exchange rates, it adds to growing concerns about all aspects of the UK economy.
Private sector services, manufacturing and construction are all in decline, while industrial action hits the public sector. The UK’s economic outlook continues to grow bleaker, and this seems to be applying some pressure to the Pound today.
Brendan Sharkey, Head of Construction and Real Estate at MHA, warns that many construction businesses could fail:
‘Ultimately while the best-run construction companies will survive, partly due to their inherent financial strength, others, including good contractors who may be dependent on third parties, will unfortunately fail. The recession and cost of the living crisis will continue to bite hard. The sector must brace itself for a challenging and uncertain 2023.’
This adds to fears about failing retail and hospitality businesses, which are being hit hard by the fall in consumer spending due to the cost-of-living crisis.
Australian Dollar (AUD) Undermined by China Worries
Meanwhile, the risk-sensitive Australian Dollar (AUD) has gained against the Pound amid an upbeat market mood. However, it’s struggling to press the advantage as worries about China’s Covid situation cap AUD’s upside.
Since China began to relax its zero-Covid policy, cases in the country have soared. Hospitals are overrun with patients – as they were in other countries during earlier stages of the pandemic – and analysts believe the death toll could be much higher than authorities are admitting.
As Australia’s export-oriented economy relies heavily on China, news from China often affects the ‘Aussie’ Dollar. Fears about rising Covid cases are capping AUD’s potential today.
GBP/AUD Exchange Rate Forecast: US Data to Dent the ‘Aussie’?
Looking ahead, the incoming US jobs data could have an impact on the Pound ‘Aussie’ pair. After yesterday’s ADP employment change figure beat forecasts, there’s a chance the non-farm payrolls report could also come in higher than expected.
If it does, this would likely increase market expectations of further interest rate rises from the Federal Reserve, thereby sparking a risk-off market mood. As a result, the riskier Australian Dollar could lose its gains against the Pound.