Pound Australian Dollar (GBP/AUD) exchange rate slips as UK GDP disappoints
The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning, following a disappointing set of UK GDP data.
At the time of writing, GBP/AUD is trading at around AU$1.9043, a fall of roughly 0.2% from the morning’s opening rates.
Pound (GBP) slips as GDP paints mixed economic picture
The Pound (GBP) is struggling for support this morning, following the publication of the latest GDP data.
While the UK economy expanded more than expected in November, by 0.3%, the three-month average proved worrisome.
September and October’s growth levels were revised lower, resulting in a 0.2% contraction leading to November. This suggests that the UK economy remains on the ropes, which is preventing Sterling from attracting support from investors.
Grant Fitzner, Chief Economist for the Office of National Statistics, commented:
‘The economy contracted a little over the three months to November, with widespread falls across manufacturing industries, which were partially offset by increases in public services, which saw less impact from strike action. The longer-term picture remains one of an economy that has shown little growth over the last year.’
As a technical recession remains on the cards for the second half of 2023, Sterling may remain downbeat over today’s session.
Australian Dollar (AUD) boosted by Chinese economic revival hopes
This morning, the Australian Dollar (AUD) is being supported by better-than-expected deflation figures from China.
In December, headline inflation softened by 0.3%, above forecasts of a 0.4% deceleration. As this is still reflective of weak domestic demand, markets are betting on more forceful measures from the People’s Bank of China (PBoC).
Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, commented:
‘Fiscal and monetary policies started to move in the right direction in Q4 2023, but it takes time for these policies to be transmitted to the economy. It is also unclear if these policies are strong enough to offset the deflationary pressure in the economy.’
Additionally, Chinese exports rose by a surprise 2.3% in December, significantly above estimates of a 1.7% increase. This suggests that exports are recovering in the economic superpower, paving the way for a revival in the coming months.
This data may have sparked risk-on trade, which is likely providing additional cushioning for the risk-sensitive ‘Aussie’.
Pound Australian Dollar exchange rate forecast: UK wage data in focus
Looking ahead for the Pound, the latest UK labour data is set to take the stage next Tuesday. In November, the UK’s unemployment rate may have continued to stay at 4.2%, which could strengthen Sterling.
However, if average earnings excluding bonuses cooled as expected – from 7.3% to 6.8% – Bank of England (BoE) rate cut bets may intensify. This would likely cause GBP exchange rates to slip as inflationary pressures continue to ease.
Meanwhile for the Australian Dollar, the core catalyst of movement is likely to be the latest Westpac consumer confidence data.
In January, Australian consumers are expected to have remained upbeat, with the measure expected to have increased to 82.5. This could strengthen the ‘Aussie’ by suggesting resilient consumer spending, which would be a boon for the economy.