Pound Australian Dollar (GBP/AUD) Exchange Rate Plummets as UK House Building Slows
(Updated 16:26 06/06/23)
The Pound Australian Dollar (GBP/AUD) exchange rate is continuing to fall today. The Reserve Bank of Australia’s shock interest rate decision may be keeping pressure on the pairing, as well as persistent strength in the price of iron ore.
A sharp fall in UK house building may also be pulling GBP/AUD lower. May’s construction PMI remained in positive territory, but the details of the survey outlined a sharp decline in the house building sector.
Speaking on the figures, economics director at S&P Global Tim Moore said:
‘Cutbacks to new residential building projects in response to rising interest rates and subdued housing market conditions resulted in the sharpest drop in housing activity for three years.’
At time of writing the GBP/AUD exchange rate was at around AU$1.8619, which was down roughly 1% from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Plummets after RBA Meeting
The Pound Australian Dollar exchange rate is tumbling today. The pairing is likely being pulled lower by the Reserve Bank of Australia’s (RBA) surprise interest rate hike.
Additionally, evidence of a slowdown in UK retail spending may also be denting confidence in the exchange rate today.
At time of writing the GBP/AUD exchange rate is at around AU$1.8652, which is down roughly 0.8% from this morning’s opening figures.
Australian Dollar (AUD) Leaps as RBA Surprises with 25bp Rate Hike
The Australian Dollar (AUD) is surging today following the RBA’s shock interest rate decision. A risk-off mood may be limiting the currency’s gains, however.
The RBA announced a surprise 25bps interest rate hike overnight. This took took interest rates in Australian rose to an 11-year high of 4.1%. The RBA also signaled that additional tightening may be necessary.
Furthermore, the central bank removed a reference to medium-term inflation expectations. As a result, economists speculated that the Reserve Bank of Australia was no longer confident in its inflation forecasts.
Speaking on the RBA’s decision, ANZ’s head of Australian economics Adam Boyton said:
‘Given our own views about the outlook for productivity, unit labour costs and the stickiness of services inflation we continue to expect another 25bp increase from the RBA, most likely in August.’
Conversely, fears that the RBA’s actions could prompt a recession may be capping stronger gains for the ‘Aussie’ today.
Pound (GBP) Declines as Retail Sales Growth Stumbles
The Pound (GBP) is edging lower against its peers today. Sterling could be coming under pressure from surprise slump in retail sales volumes.
The British Retail Consortium’s (BRC) measure of retail sales growth fell to a seven-month low of 3.7%. Soaring food price inflation was cited as a key factor in the slowdown.
Paul Martin, UK head of retail at accountants KPMG, said:
‘The wild card for the retail sector remains uncontrollable food inflation, which shows little sign of coming down in the near future, and this is having a significant knock-on effect on non-essential spending.’
A retreat in global risk appetite may also be weighing on GBP today.
GBP/AUD Exchange Rate Forecast: Will Upbeat Q1 GDP Figures Lift AUD?
On Wednesday, first quarter growth figures could have a mixed effect on the Australian Dollar. On the one hand, the economy is set to continue to expand for a fifth consecutive quarter. These signs of resilience in the Australian economy could push AUD higher.
On the other hand, the pace of expansion is set to slow to 0.3% from 0.5% in the final quarter of 2022. These weaker figures could limit any gains for the ‘Aussie’.
On Thursday, the latest Australian trade data could provide an additional boost to AUD if it prints as forecast. The country’s trade surplus is expected to have remained in surplus in April.
AUD investors will also be closely watching the latest Chinese inflation data on Friday. May’s inflation is expected to tick higher to 0.2%. If the data prints as forecast, it could strengthen AUD off the back of hopes that China will not struggle with disinflation.
The Pound will see a sparse data calendar over the rest of the week. Any shifts in bets on further action from the Bank of England (BoE) could inspire movement in Sterling.