Pound Australian Dollar (GBP/AUD) Exchange Rate Tumbles as UK Factory Orders Slump
(Updated 16:22 24/01/23)
The Pound Australian Dollar (GBP/AUD) exchange rate continued its downward trajectory over the course of the day. The latest industrial trends data from the Confederation of British Industry (CBI) may have added to the poor outlook for the UK’s private sectors. Orders in the sector fell by more-than-forecast in January.
Losses for GBP/AUD may have been limited by some signs of hope in the data, however. The January survey pointed to an easing in inflationary price pressures for the sector.
Anna Leach, CBI deputy chief economist, said:
‘Global supply chain pressures, labour shortages and energy costs are easing, enabling unit cost growth to ease back from record highs.’
Bets on a 50bps interest rate hike from the Bank of England (BoE) at its next meeting also lent support to the exchange rate today. The results of a survey released by Reuters today saw the majority of respondents agree on a 50bps rate hike from the BoE.
Raphael Olszyna-Marzys at J. Safra Sarasin said:
‘More resilient growth versus our forecasts should mean core inflation is likely to be stickier and give some space or force the BoE to hike a bit more than we forecast.’
At time of writing the GBP/AUD exchange rate was at around AU$1.7494, which is down roughly 0.7% from this morning’s opening figures.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Slides after UK PMIs
The Pound Australian Dollar (GBP/AUD) exchange rate is slipping today. The pairing could be coming under pressure from an above-forecast contraction for the UK’s services sector. Evidence of easing inflationary pressures in Australia may be limiting losses for GBP/AUD, however.
At time of writing the GBP/AUD exchange rate is at around AU$1.7579, which is down roughly 0.2% from this morning’s opening figures.
Pound (GBP) Drops as Service Sector Contracts Above-Forecasts
The Pound (GBP) is falling today. Downbeat data for the UK’s private sectors may be contributing to GBP’s losses.
January’s PMIs printed an above-forecast contraction for the UK’s crucial services sector this morning. Business in the sector highlighted higher interest rates and waning consumer confidence as key drivers of the downturn.
Performance in the country’s manufacturing sector also contracted in January, but by less than forecast.
Speaking on the data, Chris Williamson of S&P Global Market Intelligence said:
‘Industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year.’
A sharp rise in UK government borrowing may also be keeping pressure on Sterling today. The UK government borrowed more in December 2022 than any other December on record.
Persistent bets on further interest rate hikes from the Bank of England (BoE) may be preventing deeper losses for Sterling.
Australian Dollar (AUD) Falls as Business Survey Points to Easing Price Pressures
The Australian Dollar (AUD) is slipping today, although making gains against a weakened Pound. The ‘Aussie’ could be seeing losses amid mixed bets on further interest rate hikes from the Reserve Bank of Australia (RBA).
The latest business confidence figures may be adding to this pullback in bets today. The survey from the National Australia Bank (NAB) rose 3 points to -1 in December and outlined an easing in inflationary pressures across the board. This may be prompting markets to reassess their bets on further RBA action.
On the other hand, the latest private sector PMIs could be lending support to AUD today. January’s Judo Bank PMIs contracted for a fourth consecutive month amid rising costs.
Analysts are anticipating that further 25bps rate hikes from the RBA may be necessary to help cool business price pressures.
GBP/AUD Exchange Rate Forecast: Will Poor Outlook for UK Private Sectors Weigh on Pound?
Looking to the rest of the week ahead for the Pound, multiple data releases from the Confederation of British Industry (CBI) later today could weigh on Sterling. The CBI’s business optimism index is expected slip further in the first quarter of 2023.
Additionally, industrial trends orders are expected to have slipped further into negative territory in January. The poor outlook for the UK’s manufacturing sector could also add to fears of a deep recession.
Further data from the CBI on Thursday could prompt further losses in the Pound if the figures print as forecast. The latest distributive trades survey is expected to have fallen in January after a positive reading in December 2022.
For the Australian Dollar, the latest fourth quarter inflation figures could see the ‘Aussie’ climb if the data release prints as forecast. Inflation is expected to tick higher which may prompt increased RBA rate hike bets.
Friday’s fourth quarter PPI figures may have also cause movement in AUD if they add to evidence of persistent inflationary pressures.