Pound Australian Dollar (GBP/AUD) Slips amid Fears over the UK Economy
(UPDATED 14/6/23, 16:30)
The Pound Australian Dollar (GBP/AUD) exchange rate is coming under renewed pressure despite the UK returning to economic growth. Concerns, however, are mounting over the mid to long-term growth outlook for the UK. Economists at MUFG Bank voice such concerns:
‘A weaker US Dollar will help support (Sterling) and while higher rates to fight inflation could prove supportive for the Pound, there are risks going forward that this could create concerns over growth. (Meanwhile) UK yields (are) set to ease as the BoE under-delivers current expectations.’
At time of writing, the GBP/AUD exchange rate is around $1.8579, a 0.22% fall from this morning’s opening levels.
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GBP/AUD Fluctuates as UK GDP Rises 0.2%
The Pound Australian Dollar exchange rate is trading narrowly after the UK economy recorded a 0.2% monthly growth.
At time of writing, the GBP/AUD exchange rate is around $1.8601, relatively unchanged from this morning’s opening levels.
Pound (GBP) Boosted by Rebounding Growth
The Pound (GBP) found modest success this morning as economic growth returns to the UK. Following a 0.3% contraction in March, GDP growth rebounded with a 0.2% increase.
The Office for National Statistics (ONS) revealed that that the UK economy met expectations and returned to growth. The biggest driver was the service sector as it grew 0.3%, with boosts from retail and film industries. However, both industrial production and construction output recorded declines, limiting gains.
GBP investors were mostly unphased by the latest reading as expectations for another interest rate hike from the Bank of England (BoE) is all but priced in. When looking at the three months leading to April, the UK economy registered a modest expansion of 0.1% in the first quarter. The British Chamber of Commerce described it as a ‘low growth trajectory’. Darren Morgan, Director of Economic Statistics Production & Analysis at ONS, said of the data:
‘GDP bounced back after a weak March. Bars and pubs had a comparatively strong April, while car sales rebounded and education partially recovered from the effect of the previous month’s strikes.
‘These were partially offset by falls in health, which was affected by the junior doctors strikes, along with falls in computer manufacturing and the often-erratic pharmaceuticals industry.’
Australian Dollar (AUD) Boosted by Chinese Stimulus Measures
Meanwhile, the Australian Dollar (AUD) remains relatively supported this morning after the markets cheered the prospect of further monetary policy easing measures from China.
Against the backdrop of a stuttering post-Covid recovery, the world’s second-largest economy looks set to unveil a flurry of tax breaks and more loans for small businesses. China’s economic recovery has stumbled as of late, and economists are predicting that Beijing could cut the headline interest rate. As a proxy-currency for China, the Australian Dollar could be boosted on further boosts for the Chinese economy. Marco Sun, Chief Financial Market Analyst at MUFG Bank said of the situation:
‘The market is expecting the People’s Bank of China (PBOC) to cut the policy rate further. Looking ahead, the PBOC could make marginal adjustments to the policy rate in order to stimulate credit growth and avoid inflation issues in the coming quarters.’
Pound Australian Dollar Exchange Rate Forecast: Strong Labour Market to Boost the Aussie?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the latest labour market data for Australia. Unemployment is predicted to remain unchanged at 3.7%, whilst an expected increase in employment could also highlight a tight labour market.
Meanwhile, a speech from BoE Deputy Governor Jonathan Cunliffe could influence Sterling. Any hints at monetary policy beyond the June meeting could see the Pound tick higher.