Pound Australian Dollar (GBP/AUD) exchange rate flat amid UK technical recession jitters
The Pound Australian Dollar (GBP/AUD) exchange rate is trapped in narrow boundaries this morning, amid continuing UK recession worries.
At the time of writing, GBP/AUD is trading at around AU$1.9284, showing little movement from the morning’s opening rates.
Pound (GBP) undermined by recession fears
The Pound (GBP) is struggling to attract support today, as a short supply of macroeconomic data leaves it vulnerable.
Analysis of the UK economy may be playing a part in curtailing Sterling this morning too, amid speculation of a technical recession.
Martin Beck, Chief Economic Advisor to the EY ITEM Club, stated there was a ‘good chance’ of one:
‘We know that GDP – gross domestic product – shrunk in the third quarter and looking at the high frequency numbers for Q4, there’s a good chance that it may have shrunk slightly again.’
This may be serving to undercut sentiment towards the Pound, as the UK’s economic outlook remains unclear.
However, Beck additionally forecast growth later in 2024 for the UK economy, which may cushion GBP from any losses today.
Australian Dollar (AUD) rangebound amid lacklustre PBoC decision
The Australian Dollar (AUD) is trading in narrow bounds this morning, amidst a lack of impactful data. Additionally, the People’s Bank of China (PBoC) left the loan prime rates unchanged, disappointing investors.
As a Chinese proxy-currency, the ‘Aussie’ is susceptible to the PBoC’s movements, and the morning’s underwhelming decision may be capping it. The Chinese economy still appears to be sputtering along, with its recovery drawn out and less than stellar.
Duncan Wrigley, Chief China+ Economist at Pantheon Macroeconomics, commented:
‘Still, a lending rate cut to boost private sector confidence is likely in Q1, following a coordinated round of deposit rate cuts by state-owned banks in December. Policymakers have signalled repeatedly that China will not resort to a credit-fuelled mega-stimulus this time.’
Elsewhere, increasing geo-political tensions are likely sapping sentiment towards the acutely risk-sensitive ‘Aussie’ today. Conflict in the Middle East continues to intensify, with little sign of ablation.
Pound Australian Dollar exchange rate forecast: UK PMIs in focus
Looking ahead for the Pound, the core catalyst of movement is likely to be latest private sector indexes, due out Wednesday.
Both UK service and manufacturing sector activity levels are expected to have improved in January, which could boost GBP. However, with manufacturing forecast to remain in contraction, any gains may be limited in scope.
For the Australian Dollar, the lates NAB business confidence index is due to release overnight. In December, pessimism amongst Australian businesses is expected to have diminished, which may lift AUD somewhat.
Elsewhere, risk appetite is likely to play a role in shaping the pairing. As an increasingly risk-sensitive currency, bearish trade could undermine Sterling against its peers. Additionally, upbeat trade is likely to lift the riskier ‘Aussie’ against GBP.