Pound Australian Dollar (GBP/AUD) Exchange Rate Firms Despite Strong Australian Data

Pound Australian Dollar (GBP/AUD) Strengthens Despite Upbeat Australian Economic Data

(Updated 3/5/23, 08:45)

The Pound Australian Dollar (GBP/AUD) exchange rate is recovering from its heavy losses yesterday despite strong Australian PMIs and retail sales data. The service sector rebounded strongly, as it signalled the fastest expansion in 12 months. Retail sales also showcased a resilient economy as sales increased stronger than expected as figures increased 0.4% MoM in April.

At time of writing, the GBP/AUD exchange rate is around $1.8773, a 0.39% climb from this morning’s opening levels.

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GBP/AUD Plunges as RBA Surprises the Market

(Updated 2/5/23, 16:30)

The Pound Australian Dollar exchange rate is still struggling to find any ground after the Reserve Bank of Australia (RBA) shocked the markets and raised the interest rates by 25bps after a pause in the previous month.

Meanwhile, relentless headwinds are keeping a firm lid on Sterling. Weakening factory demand and soaring food price inflation is piling the pressure on the Bank of England (BoE), amid a troublesome cocktail of sky-high inflation and a stuttering economy.

At time of writing, the GBP/AUD exchange rate is around $1.8689, a 0.85% tumble from this morning’s opening levels.

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GBP/AUD Plummets as RBA Raises Interest Rates by 25bps

The Pound Australian Dollar exchange rate is tumbling after the RBA unexpectedly lifted its policy rate to 3.85%.

At time of writing, the GBP/AUD exchange rate is around $1.8626, a 1.2% nosedive from this morning’s opening levels.

Australian Dollar (AUD) Soars on Hawkish RBA

The Australian Dollar (AUD) is strengthening against its rivals this morning after the RBA surprised the markets and resumed their tightening cycle. After a pause in the interest rate hike cycle at the last meeting, the RBA opted to raise interest rates by 25bps.

Further bolstering the ‘Aussie’ is the hawkish message that accompanied the surprise rate hike. After raising the interest rate for 10 consecutive months, the latest move comes after weaker-than-expected inflation last week. RBA Governor Philip Lowe commented that further rate hikes could be in the pipeline to rein in inflation. He said:

‘Inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range.

Given the importance of returning inflation to target within a reasonable timeframe, the board judged that a further increase in interest rates was warranted today.’

Pound (GBP) Undermined by Relentless Headwinds

Meanwhile, the Pound (GBP) is struggling for demand in the face of weakening factory activity as manufacturing PMI hit a three-month low.

Output and new orders fell in the month of April, continuing to highlight the manufacturing downturn. A weakening demand pulled the PMI down to 47.8, down from 47.9 in March. With new export orders falling for the 15th consecutive month, Rob Dobson, Director at S&P, commented:

‘The UK manufacturing sector remained in the doldrums at the start of the second quarter. Output and new orders contracted, as manufacturers felt the impacts of client uncertainty, destocking and tightening cost controls.

‘There was no escape from the subdued mood of the market, with both domestic and export customers remaining reticent to commit to new contracts.’

Elsewhere, the British Retail Consortium (BRC) reported a drop in shop price inflation from 8.9% in March, to 8.8% in April. A heavy discounting of furniture and clothing sales led the fall. However, food price inflation continues to climb unabated to 15.7%, a new record high. But Helen Dickinson, BRC Chief Executive, said of the situation:

‘We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through.’

Pound Australian Dollar Exchange Rate Forecast: Service Sector Recovery to Boost the Aussie?

Looking ahead, the Pound Australian Dollar exchange rate could see further daylight between the pairing if Judo Bank services PMI final reading prints to forecast. An expected return to expansion could boost the Australian Dollar, as it would highlight the fastest expansion in the sector since June 2022.

Meanwhile, the Pound could be left to market sentiment amid a lack of economic data. Expectations of another 25bps rate hike could limit losses for Sterling, however.

Danny Tingle

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