Pound Australian Dollar Exchange Rate Wavers amid Underwhelming Energy Support Package
The Pound Australian Dollar (GBP/AUD) exchange rate is trading erratically this morning as the Treasury announced a reduced energy support package for UK businesses. Industry bosses are warning that the reduced package is a ‘massive disappointment’.
At time of writing the GBP/AUD exchange rate is trading around $1.7621, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Reduced Support Package
The Pound is struggling for much demand this morning in the wake of the Treasury’s announcement of reduced support for packages. Industry groups are warning that the government’s new energy support package will not protect firms from the shock of soaring electricity and gas prices.
The Treasury announced new plans that non-domestic users will receive a reduction in wholesale prices, rather than a fixed cap. James Cartlidge, the Exchequer Secretary, said the government would provide an additional £5.5bn of support to businesses over 12 months from April. Cartlidge added that the furlough, Covid vaccine rollout, and Ukraine support has been the right call, but ‘all have come at a cost’.
Martin McTague, National Chair of the Federation of Small Businesses, claimed the new support a ‘huge disappointment’, adding:
‘For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.’
Australian Dollar (AUD) Supported by Renewed Chinese Optimism
Meanwhile, the Australian Dollar is struggling to capitalise on the wave of optimism out of China. With the reopening of China’s borders, and optimism surrounding improved relations between Australia and China, the ‘Aussie’ could strengthen.
Further supporting the Australian Dollar is the expectation of China’s reopening could add 1% to Australia’s GDP. Economists at JP Morgan expect China’s Covid recovery to positively impact Australia’s economy. They added:
‘The largest potential upside from reopening itself sits within the services sector given China is the largest consumer of Australian tourism and education exports.’
Staying with China and further news headlines from Beijing could also be propping up the ‘Aussie’. State media Xinhua announced that its annual urban job target was met, despite a myriad of Covid woes undermining the economy. The country created 12.06m new jobs in 2022, meeting Beijing’s annual target.
However, with concerning news of surging Covid infections in China, the ‘Aussie’ could see its gains capped significantly.
Pound Australian Dollar Forecast: Australian Retail Sales to Lift the Aussie?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the release of Australian retail sales tonight. An expected recovery in the retail sector could boost the Australian Dollar. An expected increase in sales could boost investors’ spirits after the rare blip in falling sales in October.
Meanwhile, a lack of economic data until Friday could see Sterling trade on domestic woes and market sentiment. Prolonged industrial action and a downbeat economic outlook is unlikely to lift the Pound.