Pound Australian Dollar (GBP/AUD) Exchange Rate Stifled by UK Q3 GDP Contraction
The Pound Australian Dollar (GBP/AUD) exchange rate is rangebound this morning, amid confirmation of a contraction in the UK economy.
At the time of writing, GBP/AUD is trading at around AU$1.8692, showing little movement from the morning’s opening rates.
Pound (GBP) Restricted by Q3 GDP Contraction
The Pound (GBP) is seeing limited gains this morning, despite a significantly better-than-forecast slate of retail sales data.
In November, sales in the vital sector increased by a stunning 1.3%, far beyond estimates of a 0.4% improvement. However, the sector is still under clear pressure moving into the festive season.
Darren Morgan, Director of Economic Statistics at ONS, commented:
‘Retail sales grew strongly in November as heavy Black Friday discounting encouraged shoppers to spend. However, with the three-month trend continuing to fall and overall sales still below pre-pandemic levels, it’s still a challenging time for retailers.’
However, the modestly upbeat news was supplanted by news that the UK’s economy contracted in the third quarter. The final Q3 GDP print was revised lower this morning, showing a contraction of 0.1% on a quarterly basis.
Today’s data shows that the UK economy is at something of a crossroads, with the risk of a technical recession becoming harder to ignore. Because of this, Sterling’s gains may be limited in scope over the session.
Additionally, decreasing risk appetite amongst investors is likely contributing additional headwinds for GBP due to its increasingly risk-sensitive stature.
Australian Dollar (AUD) Relinquishes Overnight Gains as Risk Appetite Diminishes
The Australian Dollar (AUD) is retreating this morning, after striking multi-month highs against some peers in overnight trade.
Due to a lack of impactful macroeconomic data, the ‘Aussie’ is being left exposed to waning risk appetite across markets. Due to its acutely risk sensitive nature, the ‘Aussie’ is unable to cling to its gains this morning as investors eye the latest US inflation data.
However, bets on further hawkish action from the Reserve Bank of Australia (RBA) are likely keeping AUD underpinned today. Following the recent minutes, investors are anticipating hawkish action from the RBA in the new year as it continues to tackle inflation.
Pound Australian Dollar Exchange Rate Forecast: Christmas Closures to Mute Pairing?
Looking ahead for the Pound, thin trading conditions are on the horizon as markets close for the festive period.
Because of this, Sterling is unlikely to see much in the way of dramatic movement, and may well have a quiet end to the year.
The story is similar for the Australian Dollar. With markets closed for Christmas holidays, it is very unlikely the ‘Aussie’ will find significant traction at the start of next week.
Beyond these two days of closure, data releases are sparse until the new year. As such, risk appetite is likely to be the defining catalyst of movement for the pairing.
Bullish trade could lift the ‘Aussie’ above the Pound. However, if trading conditions are downbeat towards the end of the year, GBP could strengthen against AUD.