Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways amid Predictions of Milder UK Recession
(Updated 16:43 13/01/23)
The Pound Australian Dollar (GBP/AUD) exchange rate has continued to trade within a narrow range today. The pairing saw its losses limited by forecasts of a milder recession for the UK than previously forecast.
James Smith at ING said:
‘Predicting the depth of any recession is difficult – not least because so-called ‘non-linearities’ tend to kick in when past excesses are exposed or job cuts begin to spread across industries. But for now, we agree with those looking for a mild recession by historical standards.’
Any upward movement for the pair was capped by poor figures for the UK’s manufacturing sector, however. Production in November fell by 0.3%.
At time of writing the GBP/AUD exchange rate is at around A$1.7553, which is virtually unchanged from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways after UK GDP Data
The Pound Australian Dollar (GBP/AUD) exchange rate is trading within a narrow range today. Better-than-expected UK GDP data and poor Chinese trade data could be preventing any drastic losses for the pairing.
On the other hand, a volatile market mood may be capping GBP/AUD’s gains today.
At time of writing the GBP/AUD exchange rate is at around A$1.7529, virtually unchanged from this morning’s opening figures.
Pound (GBP) Ticks Higher as Economy Expands in November, Trades Narrowly Against AUD
The Pound is gaining against its safer peers after better-than-forecast GDP data today. On the other hand, GBP is struggling against its riskier peers amid a mixed market mood.
November’s GDP data indicated a 0.1% expansion in the UK’s economy. Experts highlighted the positive impact of alcohol sales motivated by the 2022 FIFA World Cup.
The possibility that the UK may not see a technical recession in 2022 could be helping the Pound firm today. Analysts warned that the UK’s outlook for 2023 remains poor, however.
The data may also be contributing to mixed expectations regarding the Bank of England’s path of policy tightening today. Markets have recently been betting on a slower pace of rate hikes from the BoE. Today’s better-than-expected data may be inspiring bets on further hikes and pushing the Pound higher, however.
Australian Dollar (AUD) Trends Sideways Against GBP as Chinese Exports Slump, Firms Elsewhere
The Australian Dollar (AUD) is edging higher today. A risk-on impulse may be bolstering AUD. Downbeat Chinese data releases this morning may be capping gains for the ‘Aussie’ and keeping in a narrow range against the Pound.
China’s exports fell sharply in December, hitting their lowest point since February 2020 amid a pullback in global demand. Manufacturers remain concerned that the Russia-Ukraine conflict and the possibility of a global recession could see levels fall further in 2023.
The impact of the contraction in exports may be limited by a record-high peak in China’s trade surplus, however.
Forecasts of a further surge in Covid-19 case levels in China may also be keeping pressure on AUD today. Chinese epidemiologists are expecting the peak of the Covid wave to last for around two to three months.
GBP/AUD Exchange Rate Forecast: Will Inflation Downturn Weigh on Pound?
Looking to the coming week for the Pound, the latest employment data on Tuesday could help to bolster Sterling if it prints as forecast.
November’s unemployment is expected to remain unchanged at 3.7%, whilst average earnings are forecast to edge higher. Markets could take this data as an indication of a tight labour market, which could in turn see an increase in BoE rate hike bets.
The latest inflation data on Wednesday could have the opposite effect on Sterling, however. December’s inflation is expected to edge lower which could prompt a pullback in bets on further action from the BoE.
Finally for the Pound, Friday’s retail sales could provide a further boost at week’s end if December’s data print as forecast.
For the Australian Dollar, a slip in January’s consumer confidence could pull AUD if Monday’s figures print as forecast.
A range of Chinese data releases on Tuesday may also prompt movement in the Australian Dollar this week. A forecast slowdown in China’s fourth quarter economic expansion could weigh on AUD, as well as a further slip in private sector performance.
Finally for the ‘Aussie’, unemployment figures for December could bolster the currency if remain unchanged from the previous month’s rate.