Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks to Three-Month Low amid UK Recession Anxieties

Pound Australian Dollar (GBP/AUD) Exchange Rate Scrapes Three-Month Low amid UK Recession Fears

Article updated 15:50, 22/9/23:

The Pound Australian Dollar (GBP/AUD) exchange rate is remaining low this afternoon, as the cheery market mood sends AUD skyward.

As a more risk-sensitive asset than Sterling, the ‘Aussie’ is benefitting from the afternoon’s high levels of risk appetite.

Furthermore, continued analysis of the morning’s UK PMIs has led to increasing recession anxieties.

This has sent GBP/AUD down to a near three-month low.

At the time of writing, GBP/AUD is trading at around AU$1.9006, a fall of roughly 0.9% from the morning’s opening rates.

Pound Australian Dollar (GBP/AUD) Exchange Rate Crashes as UK Private Sector Deteriorates

The Pound Australian Dollar (GBP/AUD) exchange rate is cratering this morning, following a downbeat slate of UK PMIs.

At the time of writing, GBP/AUD is trading at around AU$1.9016, a sharp fall of just under 0.9% from the morning’s rates.

Pound (GBP) Slides Further amid Ratcheting Recession Fears

The Pound (GBP) is taking another battering this morning, following a deeply worrying set of private sector indexes.

Activity across the services and manufacturing sectors contracted further in September, sparking further recession anxieties.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:

‘The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK. The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.’

With this in mind, GBP investors are likely paring back bets on further tightening from the Bank of England (BoE). Despite the bank indicating further tightening could happen later down the line, the UK economy’s active deterioration may negate this.

Australian Dollar (AUD) Marches Higher on Strong Service PMI

Meanwhile, the Australian Dollar (AUD) is on the rise this morning, following a stronger-than-expected services PMI release.

The index printed at 50.5, significantly above forecasts of a further drop to 46.5 in September. This indicated that the vital sector had managed to claw its way back to growth, cheering AUD investors.

Warren Hogan, Chief Economic Advisor at Judo Bank, commented:

‘Critically, the flash PMI report indicates that demand in the economy is holding up, and business activity remains on a sound footing. As we have seen in other economies over the past six months, the debate is not about a hard or soft landing. Recent data, including the Judo Bank PMI, suggests the risk is for ‘no landing’ for the economy.’

As such, the data implies that the Australian economy may be too resilient and may remain an inflationary pressure. With this in mind, AUD investors are moving to bet on further tightening from the Reserve Bank of Australia (RBA), bringing further tailwinds.

Additionally, a cheery market mood is likely bringing strength to the ‘Aussie’, due to its risk-sensitive nature.

Pound Australian Dollar Exchange Rate Forecast: CBI Data in Focus

Looking ahead for the Pound, next Monday brings the release of the latest distributive trades index from the Confederation of British Industries (CBI).

An improvement is forecast for September, which could lift GBP. However, if it remains deep in negative territory as anticipated, Sterling may struggle to gain ground.

Meanwhile, the Australian Dollar may struggle for direction, due to a short supply of data releases. As such, it could be left exposed to shifts in risk appetite.

As a risk sensitive currency, a shift to bearish trade could weaken AUD against safer assets, likely strengthening GBP/AUD.

John Mulcahey

Contact John Mulcahey

Do Not Sell My Personal Information